##nded state retirement systems and the road to reform ( washington : pcs, february ), available at www. pewcenteronthestates. org / report _ detail. aspx? id = 56695. pay - as - you - go basis and therefore could entail a substantial fiscal burden in coming years as large numbers of state workers retire. of course, the demographic and health - care trends faced by state governments present severe challenges for federal fiscal policymakers as well. long - term projections of the federal government ’ s budget under current policies and plausible economic assumptions show a structural budget gap that is both large relative to the size of the economy and increasing over time. 13 to steer clear of sudden, sharp, and disruptive shifts in spending programs and tax policies, and to retain the confidence of the public and financial markets, federal policymakers need to develop a credible plan to restore fiscal sustainability. the states have the opportunity to serve as role models for effective long - term fiscal planning. given the size of long - term obligations and the importance of meeting commitments to employees and the public, i don ’ t think these problems can be solved simply through across - the - board cuts in existing state programs. instead, states should intensively review the effectiveness of all of their programs and be willing to make significant changes to deliver necessary services at lower cost. this willingness to look for new solutions seems especially important in the case of health programs, where costs are growing the most quickly. conclusion today i have highlighted the challenges that state legislators face, both in the south and in other regions. in the past few years, the weak economy has significantly reduced state and local government revenues, which in turn has forced difficult decisions on spending and taxes. an improving economy should help, but state finances will remain under pressure for some time. in the longer term, like the federal government, state governments must respond to the aging of the population and the seemingly inexorable rise in health - care costs. these are daunting challenges indeed, but i believe we can find constructive ways to meet them, and i suspect that many of these solutions will be found at the state level. dealing with the fiscal challenges at all levels of government will be essential to ensuring that our resilient and dynamic economy delivers rising living standards to the citizens of your states and to our nation as a whole. for example, see the alternative fiscal scenario in the congressional budget office ( 2010 ), the long - term budget outlook (

policy areas is a solution. firstly, it is difficult to reconcile this with a monetary policy that is required by law to be conducted in an independent manner. second, i am also sceptical of the view that the overall stabilisation policy should, or even can, be fine - tuned. on the other hand, it would be a good idea to improve the conditions for a good mix of fiscal policy and monetary policy, for example by developing ways for the ministry of finance and the riksbank to exchange information on the economic situation. 1 the report, entitled " the future of european competitiveness ", was commissioned by the european commission and published in september this year. the report consists of two parts : part a. a competitiveness strategy for europe and part b. in - depth analysis and recommendations. 5 / 5 bis - central bankers'speeches