the portuguese economic policy leeway. this political consensus is not the same as “ unanimity ”, it is, rather, the acknowledgment of economic policy limits and the curtailment of the political discussion to those limits resulting from our external financing constraints and public indebtedness. the second condition is consensus among social partners. we must enhance the dialogue between social partners, so as to ensure a realistic negotiation of the distribution of income, i. e. taking into account productivity gains in the economy. we can draw inspiration from the experience in countries like belgium and finland. these countries have in place systems that, in case of risks to competitiveness, subordinate wage settlements to the imperative of safeguarding competitiveness and employment. at the same time, external conditions supportive of our adjustment must be put in place. these external conditions depend on the solidarity of our european partners, which can only bis central bankers ’ speeches be accomplished if we prove to have a sense of responsibility and the ability to comply with our commitments. the keyword in this whole process is “ trust ”. setting up the above - mentioned domestic conditions is important to strengthen our partners ’ confidence in the fulfilment of our obligations over time and to win their solidarity. as regards short - term external conditions for a successful exit of the adjustment programme, i consider it crucial that european mechanisms be in place so as to address incidental factors. to deal with any excess volatility in financial markets and, consequently, prevent investors from moving away from portuguese debt, european intervention mechanisms in the primary and secondary portuguese debt markets must be in place, which, in turn, entails the adoption of a precautionary programme. the precautionary programme will help enhance the credibility of the macroeconomic adjustment process in the period immediately after the conclusion of the programme. the associated conditionality is, on the one hand, the counterpart to our european partners ’ solidarity and, on the other hand, a key element to consolidate market confidence in the country ’ s economic policies. turning to medium - term conditions, it is crucial that the european union implements mechanisms of economy policy coordination and establishes a process of cooperative european growth. in this context, european countries with a favourable economic situation should make use of the leverage available to them to expand their domestic demand, contributing to a more balanced and sustainable adjustment of the whole economy. the establishment of a banking union is a central pillar for fixing financial fragmentation in the euro area and breaking

the link between sovereign risk and bank risk. this is a very important step towards enhanced competitiveness, given that it will make it possible for identical firms in terms of profitability and risks to have similar financing conditions, regardless of their geographical location. moreover, structural reforms should be implemented that induce potential output growth across europe ( e. g. output market deregulation and tax system reforms ). in sum : for a successful adjustment of the portuguese economy and to ensure its prosperity within the monetary union, certain domestic and external conditions must be established. by proving that domestic conditions are in place, external conditions will ensue and be strengthened. in terms of domestic conditions, social cohesion must be ensured and consensus among social partners, as well as a broad consensus between political players, must be reached. the necessary political consensus does not concern policies to be implemented but only the limits and constraints to their definition and implementation ( as i have said on other occasions, although we may have different opinions on how to decorate the living room, we must admit that the living room walls are our limit and our constraint ; in terms of economic policy, the walls in the exercise correspond to the external constraints placed on any given country ). thank you very much. bis central bankers ’ speeches