the crisis? 1. the reality of the alternatives policy - makers sometimes speak about certain courses of action as being without alternatives – “ alternativlos ” as we say in german. of course, this is not true. there always are alternatives. the question is whether they are superior, especially when assessing their likely impact and longer - term consequences. bis central bankers ’ speeches so let me begin by looking at those alternatives. as you know, one pillar of the crisis response in europe has been to consolidate government budgets. progress has so far been good : the european commission estimates that, by the end of this year, the euro area as a whole will have a budget deficit below 3 % of gdp. but this progress has also had costs in the short term : growth has turned out to be lower than forecast and unemployment has risen steeply. almost 19 million people in the euro area are currently without jobs – this includes almost one in every four young people. in the face of this hardship, the strategy of reducing deficits has come under increasing criticism from commentators and politicians. some now urge an “ exit from the austerity cage ”. others claim that, by continuing to cut deficits when growth is so low, policy - makers are ignoring the evidence, even being ideological. to exit the crisis, they say, europe must engage in an urgent change of course : more time, less austerity ; more public money, less reform. let me be clear : i am also very concerned by the high level of unemployment. i would also like to see stronger growth. but before proposing to change course, we need to think through the consequences. this is what responsible policymaking means. and put simply, the consequence of stopping cutting deficits is to increase public debts. is this a feasible or sustainable solution to our problems? the real consequences of changing course in my view, the answer is “ no ”. first, regardless of its merits, such a strategy would only work if private investors were willing to finance higher borrowing at reasonable rates. and that is certainly a big “ if ”, especially for countries whose debts are already very high and rising. second, it is an illusion to think that more debt is the answer to this debt crisis. recent research has shown that high public debt levels in the euro area hamper growth, with a serious negative effect starting when debt exceeds 90 % of gdp. average euro area public debt is already above that level – almost 95 % of gdp – so

of the european strategy often forget this element and focus only on the effect of budget cuts – which can sometimes fall hardest on vulnerable groups in society. but well - designed reforms can have the opposite effect : they can in fact create opportunities for people on the margins of society. let me allude to this : in spain, there is a rigid two - tier labour market which protects insiders. this means that young people, on flexible contracts, bear the burden of an economic downturn. as a result, almost 6 out of 10 are currently unemployed. in another country, the administration of tax collection is weak which leads to enormous amounts of tax arrears. as a result, ordinary people who are taxed on their salaries have to pay more to make up the difference. these are both cases where lack of reforms leads to unfair outcomes – and so where structural reforms could help towards a fairer society. ultimately, with structural reforms, the winners outnumber the potential losers. it is time this message gets more attention. the never - ending race however, we should not fall into the trap of thinking that it is only struggling countries that need to take hard decisions. we are all competing today, both within europe and with the rest of the world. there can be no sitting back, for any country. germany was a decade ago called “ the sick man of europe ” ; people were wondering publicly if “ germany can be saved ”. since then, the country has become a showcase of how well - designed reforms can turn the situation around. but this example also serves as warning – others can just as quickly catch up. if struggling countries continue to pursue ambitious reforms, and germany rests on its laurels, it could once again be this country left in the slow lane. so it also needs to tap new sources of growth, like professional services, that remain unreformed. 3. conclusion let me now conclude. the challenge avoiding false alternatives, and taking the hard decisions, is not a new one. niccolo machiavelli observed in the 16th century that, “ there is nothing more difficult to carry out than to institute a new order of things. because the reformer has for enemies all those who have profited under the old conditions and lukewarm defenders in those who may do well under the new. ” 2 niccolo machiavelli, the prince, 1532 bis central bankers ’ speeches we at the ecb are no different : we also have structural problems to address. and since