burden of adjustment across society. this, in turn, helps to diffuse the risk of social tensions and political crises. the structural reforms agenda initiated in the crisis countries – and in particular in the programme countries – has therefore been wide - ranging. 4 challenges for stressed countries given the observed benefits of structural reforms, why has implementing them therefore been so costly for some stressed countries? indeed, from 2009 to 2013 real gdp fell cumulatively by about 7 percentage points in portugal and spain, 8 percentage points in italy, 11 percentage points here in slovenia and 26 percentage points in greece. at the same time, the unemployment rate rose to very high levels in all these countries, with the rate of youth unemployment being more than double the overall one. the first contributing factor is that most of the countries involved entered the crisis with rigid institutions and structures. an instantaneous adjustment of relative prices was not feasible due to nominal wages and prices being “ sticky ”. 5 as a result, both the duration and the real cost of adjustment have increased sharply, as did the burden borne by the more vulnerable members of the society, affecting the political acceptability of reforms. the cost of high rigidities can be well understood when comparing the adjustment in ireland with those in the other programme countries. in the first case, the correction in relative wages and prices occurred immediately after the 2008 – 09 recession and basically all the nominal adjustment had already been made before ireland entered the financial assistance programme in late 2010. this is very different from what happened in greece, portugal and spain, where the nominal adjustment has lasted many years after the recession. as a result, in ireland, an export - driven recovery started back in 2011, while the unemployment rate started to decline in 2012. for the other three countries, the recovery story had to wait two or three more years. second, when reforms were undertaken, there were implementation obstacles. ex ante the approach to structural reforms was broad - based and aimed at all critical weaknesses in a comprehensive manner. but ex post it turned out that it was easier to change institutions and rules in the labour market than in product and services markets. this meant that marginal cost improvements did not automatically translate into price improvements. for example, labour costs fell by around by 18 % in greece from 2009 – 13, but price adjustments did not see blanchard, o., and f. giavazzi ( 2003 ), “ macroeconomic effects of regulation and deregulation in goods and labor markets, ” the quarterly journal of economics,

a possible legal change to facilitate the greater use of technology, and the changing patterns of payment instrument use over the past few decades that we hope to document through some new surveys. clearly, these changes will continue and even accelerate, driven by the evolution in technology and, more fundamentally, by the evolution of ideas. our greatest challenge may be to sort through the promises of the future and find practical ways to improve the present. again, thank you for inviting me to speak here with you today. i look forward to continuing to talk with banks and their representatives about banking issues.