in housing markets. what then should be done on the policy side? let me clarify that country - specific price and labour cost dynamics that result from relatively inefficient institutional arrangements or domestic policies need to be addressed by national policy - makers ; as already stressed, structural reforms are key. with respect to labour market policies, governments and social partners must share responsibility for ensuring that sufficient attention is paid to competitiveness and employment in wage determination. in particular, schemes in which nominal wages are indexed to consumer prices should be abolished. such schemes involve the risk of upward shocks in inflation leading to a wage - price spiral, which would be detrimental to employment and competitiveness in the countries concerned. furthermore, national authorities can make a substantial contribution to more modest labour cost developments. in particular, the public sector should be a role model in terms of wage - setting and should not contribute to strong overall labour cost growth. some countries have already started to witness a correction or unwinding of the imbalances accumulated over the last few years. in this context, the sooner corrective measures are taken by the national authorities, the lower the risks will be of that country experiencing a protracted period of low growth and losses in employment. conclusion ladies and gentlemen, having covered a number of areas which are at the heart of monetary policy - making in the euro area, let me conclude by summarising some important points. specifically, i would like to list a number of points which should be kept in mind if we want to preserve and consolidate the remarkable success of the euro and to reinforce the strength and resilience of the euro area economy. • first, in the current uncertain environment it is crucial that the public ’ s trust in the soundness of fiscal policies is preserved. therefore, i welcome that the european council reconfirmed that budget policies must continue to be in line with the provisions of the stability and growth pact. this means that the rules of the pact should be applied fully, while also reflecting the current exceptional circumstances. concretely, fiscal policies need to ensure the longer - term sustainability of public finances. for some countries, this implies that there is no leeway for fiscal loosening. by contrast, countries with budgetary room for manoeuvre can let automatic stabilisers operate freely and fully, thus contributing to smoothing the business cycle. • a second building block on which i touched, and through which we will consolidate our success, is structural reforms. as i have said today,

##inanced by the eurosystem on a one - to - one basis, given the high degree of overcollateralization of eurosystem credit that i have mentioned above. actions of other central banks as regards other central banks, in general their primary response to the market turmoil has been to intervene to keep short - term money market rates near target rates, through more active liquidity management. moreover, central banks have aimed to ease the increasing pressure in term money markets by : ( 1 ) increasing the viability of standing loan facilities as backstop funding options ; ( 2 ) boosting the share of longer - term operations in total refinancing provided to banks ; and ( 3 ) expanding the range of acceptable collateral and eligible counterparties, in those countries where it was needed. central banks have also gradually increased their mutual cooperation, initially through enhanced communication and collective monitoring of market developments, and later on by undertaking coordinated actions to provide funds over the year - end. these actions have included the establishment of the earlier - mentioned foreign exchange swaps. box 3 operations by other central banks more in detail, the actions undertaken by other central banks in response to the market turmoil have included the following : in order to steer short - term market rates, central banks have conducted operations that were either outside their regular schedule or provided amounts larger than usual, and have taken further steps to equilibrate demand and supply for central bank reserves at the policy rate. - the federal reserve on 17 august 2007 enhanced the attractiveness of the central bank ’ s standing loan facility by cutting the spread between the interest rate on its lending facility ( the discount rate ) and the federal funds rate target to 50 basis points ( from 100 basis points ), and by increasing the allowable term on loans from overnight to 30 days. on 16 march 2008, the spread between the discount rate and the fed funds target rate was further reduced to 25 basis points and a new facility for primary dealers was introduced ( primary dealer credit facility – pdcf ). this facility, which is very similar to the discount window for depository institutions, has been heavily used from the beginning. - the bank of england increased target ranges for the maintenance period from the normal ± 1 % up to ± 60 %, thereby greatly increasing flexibility of banks. - central banks have also sought to address continued pressures in term markets. - the federal reserve has provided longer - term financing ( 28 days ) to primary dealers and introduced a term auction facility (