’ t think that such risks could materialise. on the contrary, inflation expectations are remarkably well anchored in line with our definition – less than 2 %, close to 2 % – and have remained so during the recent crisis. as regards the economy, the idea that austerity measures could trigger stagnation is incorrect. ” incorrect? “ yes. in fact, in these circumstances, everything that helps to increase the confidence of households, firms and investors in the sustainability of public finances is good for the consolidation of growth and job creation. i firmly believe that in the current circumstances confidence - inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today. ” which countries are most at risk after greece? i have no particular comments on that. all countries are on their way to put their house in order. there is talk of difficulties in spain and among spanish banks … i have just responded to the question. will you say whether the euro itself is at risk? “ the euro is a very credible currency. it has kept its value from the start in a way that is remarkable and has ensured price stability for 11½ years. average annual inflation in the euro area over this period has been 1. 98 %, in line with our definition of price stability, and this is the best result recorded since the second world war in all of the euro area economies. a currency which safeguards price stability is a major asset in the eyes of investors, both domestic and international. ” is the sovereign debt crisis worse than the sub - prime crisis? “ i will say that the situation we are experiencing at the moment, in europe and in the world, was triggered by the financial crisis, which had a very significant impact on the deterioration of public finances everywhere. it is a global phenomenon. i am confident that governments will manage to overcome these difficulties. ” truthfully, did you expect all of this turmoil? “ i am convinced that we always have to be alert. credibly alert. without causing alarmism. ” do you think that there will be a federal government of europe? “ european integration is a historic process which can only be understood from a long - term perspective. we will see whether in the end the institutional framework will be a political federation or a confederation of sovereign states, or whether other imaginative options will be explored. in the end, it is the people of europe who will decide. that said, when you have a single currency, you need a set

- correcting, and even while some institutions weaken, others come to the fore. india ’ s is a dynamic society, ever changing, ever rejuvenating. indeed, the possibilities for free enterprise in india today are probably better than ever before in its history. conditions for free enterprise to flourish have historically thought to be two : 1. level playing field with easy entry and exit, and 2. protection of property rights. let me first discuss these conditions, then i will add two more that i think important for free enterprise to be politically viable. 3. broadening access to capabilities, and 4. a basic safety net. a ) level playing field with easy entry and exit. • competition leads to efficient outcomes when anyone can enter, set up a firm, and compete. the best entity wins leading to economy wide efficiency. • free enterprise and competition combats prejudice and social biases. o o dalit entrepreneurs direct benefit transfers bis central bankers ’ speeches • government and regulators are needed to set the rules of the game and enforce behavior. biased government / regulation distorts the playing field. not that there should be no handicaps but not unequal handicaps. o • work i did on entry regulation : italian firms small. but low entry. why? work i did rajan, laeven and klapper ( 2006 ). italian firms need greater size to overcome fixed costs of entry but grow more slowly. slower economic growth. in india o license - permit raj : remedy : liberalization of the 1990s. • o resources raj : privileged access to mines, spectrum, etc. remedy : auctions and transparency. o inspector raj : remedy : start up india, reducing red tape, entry barriers. continuing clean - up of laws gives hope, especially as states compete for simplifying regulations. rbi master directions. some continuing infirmities that especially hurt new firms : o infrastructure plus logistics : weighted against the small. o o roads, ports, airports, power, internet marketplaces land : weighted against the new. entry of 23 new banks competition between states finance : weighted against new and untried. changing with technology and new institutions. small firms and small banks – evidence : small finance banks unique id : government treds start - ups – liberalizing bis central bankers ’ speeches • still uneven playing field on distress. o o o resolving large firms very difficult : workers as pawns. courts focus on revival rather than resolution promoter benefited hard for debt to recover money