employment in the euro area. taking a broader perspective, i should like to take this opportunity to further emphasise the overall soundness of the institutional framework for monetary and economic policy laid down by the treaty. in fact, the treaty provides, in all fields, a clear and consistent allocation of policy objectives and responsibilities among the various policy - makers. in this respect, it is the task of fiscal policy to make its contribution to enhancing the growth potential of the euro area by maintaining sound fiscal positions and helping to reinforce the proper framework for the functioning of a market economy. it is also important that fiscal policy maintains a medium - term orientation throughout the economic cycle. the results of fiscal policy in several countries have been very disappointing in the last few years. the pace of reform has significantly fallen and there have even been setbacks in the efforts to consolidate in some cases. in fact, the main reason why several countries at present are in budgetary difficulties is because they have not used the past phase of higher growth to substantially improve their fiscal position, i. e. they have shown precisely a lack of medium - term orientation. it is crucial that fiscal policy fully respects the basic principles of the treaty and of the stability and growth pact, namely to avoid excessive deficits and to attain budgetary positions close to balance or in surplus in the medium term. if the pact is to work efficiently, all countries with remaining imbalances must commit themselves to implementing a clear consolidation strategy. such a strategy should specify a credible adjustment path with significant improvements in the cyclically - adjusted budget balance every year. this path should be followed strictly and completed within the shortest possible time frame. it must be based on realistic assumptions for the economic environment and include clearly specified measures. furthermore, accounting rules must be rigorously applied and strict procedures established to monitor the implementation of the consolidation strategies. in the end, the full adherence of all governments to the stability and growth pact can only be beneficial for the euro area. finally, it is important to stress, especially in a phase of uncertainty regarding economic activity, that decisive structural reforms will contribute to increasing the euro area ’ s resilience to economic shocks, enhance price and wage flexibility, and thereby reduce the costs associated with an economic downturn and increase the euro area ’ s growth potential. structural reforms in product, labour and financial markets are essential in order to foster non - inflationary growth in the euro area and create a climate of economic stability and dynamism. countries should therefore speed

not only justified by the growing importance of markets. over the last decade, institutions have also become more international. in europe, for example, we now have a few truly pan - european banks and even more that operate across borders on a regional basis. furthermore, in the last year we have seen that not only deposit - taking commercial banks can pose threats to financial system stability. events in the us tell us that a broad array of other financial institutions, such as investment banks, monolines and the banks ’ various kinds of special purpose vehicles have contributed to the build up of imbalances. therefore, analytical focus is needed not only on commercial banks but also on their different counterparties. another lesson for central banks i would say is to use their expertise to work more proactively on financial stability policy issues. the current crisis – as well as most historic ones – can partly be explained by regulatory failures. central banks have a big responsibility to make sure that such failures are avoided. for example, we should promote regulation that favours efficiency and counters undue risk - taking. we should also try to make sure that regulation is designed in such a way that there is no scope for circumventing regulation in order to avoid costs or administrative burdens. last but not least, greater international co - operation and harmonisation is desirable also in the analytical field, as this would help to provide a more comprehensive global surveillance of financial stability and facilitate coordinated policy responses to financial turbulence. to this end, it is very welcome that the financial stability forum and the imf will intensify their cooperation in order to develop the assessments of financial stability risks on a global scale. within the european union, successful efforts have been made to establish a common framework for assessing the systemic implications of cross - border crises. the main purpose of this framework is to serve as a common language between authorities and countries for discussing the systemic impact of a financial crisis, thereby enabling them to reach a common view on the economic impacts of any particular crisis. this framework is still quite fresh and has not yet been implemented in most eu countries. therefore, its use has been limited in the current crisis. however, when it is eventually implemented i am convinced that it will contribute significantly to the common understanding of the dynamics and implications of financial crises. i would therefore like to encourage more countries to follow the initiative taken by the eu countries. concluding remark let me now conclude. the crisis we have seen over the last one and a half years will most