such discrepancies were followed by significant upward revisions of the budget deficit. with regard to the implementation of the revised stability and growth pact, there is no uniform picture emerging across member states. overall, progress towards sound public finances remains slow. in general, member states have defined reasonable medium - term budgetary objectives, and the planned consolidation progress is in most cases in line with the revised framework. however, in some cases the planned pace of consolidation is very slow indeed, and many countries do not have sufficiently concrete or credible plans to comprehensively address the fiscal imbalances. the implementation of the excessive deficit procedure is broadly consistent with the revised pact. at the same time, a number of countries continue to report severe imbalances, and some of them have presented plans that barely attain the minimum adjustment called for by the revised pact, despite the improving growth outlook. the prospective budgetary costs of population ageing also cast a shadow over the long - term fiscal outlook for most euro area countries. to adequately address the long - term fiscal challenges and support higher sustained economic growth, sound budgetary positions should be pursued in a more determined manner, avoiding reliance on one - off and temporary actions and employing effective policy measures, embedded in a comprehensive reform strategy. such comprehensive and systematic consolidation and reform efforts will enhance the credibility of the revised pact, help to establish confidence in a sound and growth - friendly fiscal environment and boost consumer confidence, thus fostering economic activity and employment growth. the lisbon strategy the recent call by the european council to maintain the momentum of the relaunched lisbon strategy for growth and employment is very important, and has been explicitly welcomed by the ecb. it is vital for potential output growth and job creation that this initiative is successful and that european citizens can see that it delivers results and eventually increases their welfare. there is a real danger that, with a further delay of reform delivery, europe may not reap the expected benefits of reforms, including greater market flexibility and efficiency, higher productivity and potential growth, reduced unemployment and price pressures and increased resilience to economic shocks. we clearly need more reform in almost all policy fields : more reforms of public expenditure as well as of tax and benefit systems, so as to enhance the quality and sustainability of public finances ; more measures raising wage and price flexibility ; more competition in goods and especially in services markets ; more action to achieve a fully operational eu internal market ; more steps towards an entrepreneur - friendly business environment ; more research & development ; more innovation ;

india as well as states while considering fiscal responsibility legislations. the point of harmony between fisc and monetary policy is, therefore, well taken and i would stress, on the basis of our experience in india, the value of coordination between fiscal and monetary authorities in matters of structural transformation, specially legislations relating to the economy. thirdly, on the emphasis placed upon the tool of short - term interest rate, the real interest rate is, in some ways, an outcome of policy implementation in containing inflation expectations. shifts in inflation expectations are indeed the proximate cause of the changes in the mean level of inflation and the policy makers do, therefore, focus on maintaining credibility by carefully monitoring inflation expectations for any indications that they are rising. this forward - looking approach has helped india in bringing down inflation rates from over eight per cent to about four to five per cent in recent years. there is also a need to recognise the importance of inflation perceptions. in other words, if the prices of commodities, which are purchased frequently, rise, the perception of inflation would be different from say, a rise in the price of television set. while recognizing the overlap, the distinction between inflationary expectations and inflation perceptions in the context of inflation policy is worth bearing in mind. for example, inflation perceptions tend to harden if prices of frequently purchased goods increase. there is an interesting issue here on delicate distinction between monitoring and influencing inflation expectations on the one hand and giving forward indication on the other. in practice, it is a delicate task to make such distinction but it is critical to bear such a distinction in policy - making and communication. as governor mervyn king eloquently argued in his speech yesterday at the lord mayor ’ s banquet in the city, there are dangers of a central bank trying to give forward guidance in this highly uncertain world. governor king said, “ the monetary policy committee ( mpc ) reaches a new judgment each month, made afresh in the light of all the new information about the prospects for inflation. we don ’ t decide in advance. so trying to give direct hints on the path of interest rates over the next few months risks deceiving financial markets into believing there are definite plans for the next few months when no such plans exist ”. in fact, the fed announced a few days ago that chairman ben bernanke had established a subcommittee to examine a number of communications issues. more generally, the appropriateness of a central bank doing the thinking on course of markets for the market -