surplus is a necessity for greece given its high debt level, with or without debt measures. of course, consolidation itself should be carried out in a growthfriendly way and tilted towards a reduction in expenditure rather than an increase in taxation. fiscal policies are embedded in a wider reform strategy comprising labour and product market reforms, measures to fight tax evasion and the reduction of non - performing loans ( npls ) to allow banks to lend again to greek households and companies. these measures will help reduce unemployment, increase investment and support growth. this will accelerate the lifting of capital controls and reduce fiscal constraints over time. greece is starting to reap the benefits of these reforms. economic sentiment is improving and we expect real gdp growth to increase in 2017. why is it that, after three mous and five governments since 2011, greece has not yet managed to turn the page? what has been done wrong under the mous all these years? greece has been through a painful adjustment, which could not have been avoided given the high imbalances it built up until 2010. and the adjustment took longer because of the lack of implementation and prevailing uncertainty ( including in the rest of the euro area ). with hindsight, the programme could have been designed to be more conducive to growth. for example, the opening - up of the product market has lagged wage cuts, protecting rents and making the burden of adjustment fall heavily on workers. greece still lacks a comprehensive social safety net and had to protect the most vulnerable using taxes and pensions, making the tax structure very distortive. and europe had only limited instruments to support social safety nets during the adjustment phase. but let ’ s also not forget that europe had to build its own crisis resolution architecture out of nothing when the crisis hit. how do you explain the fact that, after the last recapitalisation of greek banks and the relaxation of capital controls, we have witnessed neither a significant return of deposits 2 / 4 bis central bankers'speeches nor more liquidity in the economy nor a reduction in non - performing loans? even though confidence levels as evidenced by a return of deposits and hoarded cash have strengthened following the successful completion of the first review of the programme, confidence still remains fragile. we expect that market and depositor confidence will further improve following the successful completion of the second review and the steady, successful implementation of the programme. several of the measures to be implemented in the context of the second review will contribute to the return of confidence

is of course one factor for the economy, and hence also for inflation ; in this context, the exchange rate is an important element but not the objective of our monetary policy. what ’ s more, we haven ’ t seen any major change in the euro exchange rate for some time now. 4 / 6 bis central bankers'speeches but the announcement of asset purchases put the euro under massive pressure in 2014 …. … after it had risen sharply prior to that. this was a correction of a previous overvaluation. seen overall, the euro area has generated a trade surplus over recent years. that would normally strengthen the euro in the long run. experience suggests that such an impact does exist, but it is very, very long term. it develops over decades rather than years. let ’ s turn again to the core of monetary policy – the inflation aim. for a number of months now, the ecb has been speaking of symmetry in its aim. at the same time, though, it is maintaining that inflation should remain below, but close to, 2 %. how does that fit together? first and foremost, it means that we combat deviations above that aim and below that aim with the same determination. if inflation is above our aim of inflation at levels that are below, but close to, 2 %, we try just as hard to get it there as when inflation is below the aim. but isn ’ t it foolish to set such precise targets? surely the ecb is not able to steer inflation that accurately. we ’ re aiming for this in the medium term, not for a specific year. which gives us some room for manoeuvre. how long exactly is the medium term? that depends especially on the source of the shock. a demand shock requires a shorter horizon for the policy response, that is policy should be less patient, whereas a supply shock may call for a longer horizon, and hence more patience. wouldn ’ t it make sense to allow more downward scope in the inflation aim? the aim must be crystal clear, especially when inflation is low. the closer it is to zero, the more pressure we find ourselves under to act. some critics think that a temporary bout of deflation would not be a disaster. if it comes from a boom in productivity and higher real incomes, and ends foreseeably quickly, then no, it ’ s not. but it must be certain that inflation can be anchored above zero again. close to 2 %, to be precise,