allow for the necessary flexibility. automatic fiscal stabilisers are relatively large in the euro area and provide a powerful source of fiscal support to a weakening economy. where room for manoeuvre exists, additional budgetary measures could be effective if they are timely, targeted and temporary. turning to structural policies, the ongoing period of weak economic activity and high uncertainty about the economic outlook imply the need to strengthen the resilience and flexibility of the euro area economy. product market reforms should foster competition and speed up effective restructuring. labour market reforms should help to facilitate appropriate wage - setting, as well as labour mobility across sectors and regions. the current situation should therefore be seen as a catalyst to foster the implementation of necessary domestic reforms in line with the principle of an open market economy with free competition. we are now at your disposal for questions.

longer possible. the so - called zero lower bound on the fomc ’ s policy interest rate was not the only challenge the committee faced. first, the depth of the recession, combined with ongoing concerns about the functioning of the financial system, raised significant uncertainties about both the likely pace of recovery and the effectiveness of monetary policy in supporting growth. the recoveries from most post - world war ii u. s. recessions had been relatively rapid, with production, unemployment, and other key variables returning to close to normal levels within six to eight quarters. in such cases, the policy horizon most relevant to financial markets might be the next several quarters. in the aftermath of the recent crisis, however, the committee had to consider the possibility that a highly accommodative policy might be required for a number of years. second, a federal funds rate effectively at zero created an important asymmetry for policy planning. on the one hand, if the economy were to recover rapidly and inflation were to increase, monetary policymakers would be able to respond in the normal way, by raising the federal funds rate. but, on the other hand, if the economy were to remain weak or recover only gradually – the case we actually faced – the fomc would not be able to cut the funds rate further. moreover, in the latter case, the economy could face an increased risk of deflation – falling prices. as the case of japan illustrates, deflation may impede economic growth while being very difficult to escape. to try to pre - empt such outcomes, a strong case bis central bankers ’ speeches existed for monetary policy to be more accommodative than suggested by standard policy rules calibrated to normal times. 4 so the committee faced a situation in which more monetary policy accommodation was needed, and possibly for quite a long time – yet its basic policy tool, the federal funds rate target, had been pushed to its limit. to put the committee ’ s problem another way, standard policy rules and a range of other analyses implied that, to achieve the fomc ’ s objectives, the target for the federal funds rate should be set well below zero, which, of course, was not feasible. fortunately, as i discussed earlier, the degree of accommodation provided by monetary policy depends not just on the current value of the policy rate, but on public expectations of future settings of that rate. the committee accordingly realized that it could ease policy further – and reduce uncertainty about future