area have exceeded the 3 % reference value for the deficit ratio. under these circumstances, the stability and growth pact, which has been put in place to safeguard sound and sustainable fiscal positions, should be rigorously applied. the ecb calls to strengthen the governments ’ commitment to strictly adhere to its provisions. national policy makers should give fiscal consolidation top priority in the context of ongoing economic recovery, and bring the deficit ratio to below 3 % of gdp in line with the ecofin recommendations. based on the stability programme updates, governments appear to be on track this year, but further measures will be necessary in the coming years to correct excessive deficits within the set time horizon. as regards the composition of the fiscal adjustment, we welcome a focus on the expenditure side, because the size of the public sector has significantly increased in the crisis and because expenditure - based consolidation has proven to be more effective in the past. governments can enhance the credibility of fiscal consolidation by strengthening national budgetary frameworks and implementing structural reforms to increase potential growth. in this context, i welcome the european commission ’ s initiative for a europe 2020 strategy and the stronger role of the eurogroup in multilateral country surveillance which is overdue. at the same time, it is important that fiscal surveillance under the pact remains a process of its own right and that the fundamental principles of the treaty and the pact are fully preserved. a successful exit from the strong fiscal expansion in the wake of the recent crisis will require ambitious measures and a strong political will regarding implementation. i am confident that european fiscal policy makers will succeed in restoring the sustainability of public finances. the adjustment efforts undertaken by the irish government and more recently by the greek government can be seen as promising first steps in the upcoming consolidation process. policy responses to imbalances one of the main drivers of the financial crisis were the large global external imbalances. these imbalances implied massive capital inflows into deficit countries. those inflows had partly been financed by the issuance of financial instruments, whose value was shattered in the turmoil. the imbalances reflected a lack of medium - term orientation towards stability and sustainability of macroeconomic policies in key deficit and surplus economies. the euro area did not contribute to the build - up in global imbalances. its current account has remained close to balance over the years. the crisis has induced a partial reduction in global imbalances, but this correction appears to be largely cyclical. some important structural factors that led to unsustainable

imbalances remain largely in place. a risk that unsustainable global imbalances might re - emerge in the period ahead can therefore not be ruled out. ruling it out would require rigorous policy adjustments in key deficit and surplus economies. the g20 ’ s decision to create a process of mutual assessment of its members ’ macroeconomic and structural policies is fundamental in this respect. to be successful, this process requires that peer surveillance is executed fairly and without complacency, and that the countries and economies concerned have the will and the operational capacity to change their domestic policies accordingly. these are necessary conditions to pave the way for a better functioning of the global economy. the euro area can enter this process from a positive standing, given its medium - term orientation in monetary, fiscal and macroeconomic policies. let me conclude by recalling that macroeconomic imbalances are not only confined to the global level but also appear within the euro area. these imbalances remain a challenge, largely reflecting a lack of adjustment in a number of member states. it remains indispensable that the countries concerned bring their monitoring of cost competitiveness indicators, their structural reforms, and their fiscal consolidation efforts more into line with the principles and rules underlying the functioning of monetary union. this would allow euro area economies to reap fully the macroeconomic benefits of emu.