production. third, by their very nature, economic frameworks can only provide a summary description of the economy and thus do not incorporate all relevant information. in particular, some information is not easily integrated into the framework used to produce the projections or may change after they are finalised. fourth, expert views are inevitably incorporated into projections and there can be good reasons at any moment of decision - making to deviate from the particular views or approaches on which they are based. the two - pillar approach chosen by the eurosystem - including a prominent role for money as the first pillar - is, to some extent, a reflection of these general limitations of forecasts and projections. i should stress that, because of these limitations, the second pillar of the ecb ’ s strategy also includes other forms of analysis in addition to macroeconomic projections. first, the ecb ’ s projections are cross - checked and compared with forecasts produced by others, such as international organisations and private sector entities. second, the forward - looking information and expectations embodied in financial prices and yields is thoroughly analysed and evaluated. this information can also be compared with the staff projections. finally, any information that is not contained in the staff projections for practical or timing reasons - such as the latest available outturns of certain data series must also be incorporated into the overall assessment. developments in individual indicators are also closely followed outside the framework of the forecasting exercise. it follows from this discussion that the governing council does not use its staff projections as the main tool for organising and communicating its assessment. rather, the governing council evaluates them alongside - and compares them with - many other pieces of information and forms of analysis organised in the two - pillar framework. in the context of the ecb ’ s strategy, macroeconomic forecasts and projections therefore play an important - albeit limited - role. two important points follow from the role of projections in the ecb ’ s strategy and the procedures used to produce projections within the eurosystem. first, the projections are produced by staff experts and do not embody the policy judgement of the governing council. they therefore represent one input into the policy - making process and not the outcome of the governing council ’ s deliberations. the governing council must exercise a policy judgement in evaluating the projections it receives, alongside all other analyses, when drawing implications for policy decisions. second, since policy decisions are based on a broad range of analyses conducted under the two pillars of the ecb ’ s monetary

my view, the building blocks of any comprehensive plan of reform for europe are the following : implementing fiscal consolidation and securing the sustainability of public finances ; promoting sustainable growth and job creation ; enhancing the crisis management framework ; improving economic governance ; strengthening the financial sector. let me briefly elaborate on these points. iii. ( a ) implementing fiscal consolidation and securing the sustainability of public finances the financial and economic crisis has led to a very considerable deterioration in the fiscal positions of euro area countries, in terms of both large budget deficits and rising government debt. however, the economic recession amplified imbalances in fiscal policies that had built up gradually long before the crisis, reflecting the failure by many countries to implement sound fiscal policies during past periods of strong economic growth. on the institutional side, the eu ’ s fiscal framework, which is embedded in the stability and growth pact ( and that had been watered down in 2005 ), proved to be too weak to enforce fiscal discipline and was not implemented with sufficient rigour. as mentioned earlier, reflecting large fiscal imbalances and a loss of confidence on the part of investors, government bond spreads increased dramatically for some euro area countries and became very volatile in 2010. the willingness of investors to support governments ’ financing needs declined, with the result that the governments of three euro area countries have since then required financial support by means of joint eu / imf programmes. these programmes are subject to strict conditions on fiscal adjustment in order to restore public finances to health. however, the need to pursue more ambitious consolidation targets is more general. it is striking to see that there are currently only two euro area countries that are not subject to an excessive deficit procedure. fiscal consolidation is essential to ensuring an environment conducive to output growth and price stability. looking ahead, implementing fiscal consolidation and securing the sustainability of public finances are among the major challenges faced by policy - makers. the consolidation of public finances requires a comprehensive policy comprising : ( i ) the timely correction of excessive deficits ; ( ii ) the reduction of government debt to more sustainable levels ; and ( iii ) the reorganisation of banks in order to limit strong links between the balance sheets of governments and financial sectors, which typically result in the socialisation of banks ’ liabilities in times of crisis. these measures need to be complemented by pension and healthcare reforms to alleviate the fiscal burden arising from population ageing. bis central bankers ’ speeches moreover, fiscal governance in the euro area needs to be reinforced by means of the strengthening of the stability