generated by the systematic and credible consolidation of government budgets and the anchoring of inflation expectations at a low level prior to monetary union. the new member states are just in the process of experiencing this. but the “ convergence dividend ” cannot be perpetuated by a declaration of political will. entry into european monetary union has to be prepared in a credible manner. in saying that, country - specific differences are possible and, given the great diversity that exists, necessary, too. four of the ten new member states are practising active inflation targeting. three are already members of erm ii. two other countries are gearing their monetary policy to an exchange rate peg ( to the euro and to a basket of currencies ). ultimately, the crucial need is to pursue a credible stability - oriented policy. falling inflation rates – and even falling inflation expectations – lead to a growing “ convergence dividend ” of lower long - term interest rates and greater investment certainty for enterprises. besides nominal convergence, it is also important to assess the degree of real convergence. this covers such topics as business cycle synchronisation, the degree of trade and financial integration, factor mobility as displayed in wage and price flexibility, and the risk of asymmetric shocks and the capacity to absorb them. interlinkages between monetary and fiscal policies it is not least fiscal policy that benefits very considerably from the “ convergence dividend ”. increased growth and a declining interest rate burden significantly widen the scope of fiscal policy action. fiscal policy thus benefits directly from a stability - oriented policy. but fiscal policy can and must also contribute to a stability - oriented policy. allow me to bring to mind the three fundamental reasons for limiting the general government deficits under the terms of the stability and growth pact. in the long run, stable money can only exist if there are stable public finances. that applies, above all, to a monetary union in which the stability costs of government debt and deficits also have to be borne by others. only budgets which are on average over the cycle balanced in surplus provide scope for the steadying influence of the automatic stabilisers and at the same to reduce long term debt levels. not least, we have to counter the growing costs of government debt at an early stage. i am referring here to the existing explicit and implicit debt and to the fact that due account has to be taken of the dramatic demographic trends in an aging society. sound fiscal consolidation contributes directly to credible macroeconomic stabilisation. if we

you that the digital economy is a promising way to raise trend growth and overall living standards. we cannot be satisfied, though, if some of the potential gains are left on the table, because many people will be left behind and important markets will be virtually uncontestable. it does not have to be this way if we choose a road for policy that effectively manages the 5 / 7 bis central bankers'speeches downsides of innovation without stifling it. of all the areas where we could develop and implement a better strategy, here are my top three : ( i ) develop a dynamic workforce with the skills to match the jobs, and encourage more labour force participation ; ( ii ) keep market power in check, particularly the power that comes from control of consumer data, to encourage competition and limit monopoly profits ; and ( iii ) manage the growing operational risks associated with the digital services that are provided by a concentrated set of firms to systemically important financial institutions. we will need to judge wisely when it is best to use public policy tools to manage risks and when to let private enterprise work its magic. we ’ ll need to work together and in the field to inform these judgments. i am confident that, together, the g7 will show leadership and will build with the private sector a shared sense of responsibility for the future. i would like to thank gurnain k. pasricha, lori rennison and eric santor for their help in preparing this speech. 1 the data for this calculation are taken from m. roser and e. ortiz - ospina, global extreme poverty ( 2018 ). poverty is defined as a consumption level below int $ 1. 90 per day, adjusting for price differences and inflation. 2 see international monetary fund, world economic outlook, chapter 3, “ understanding the downward trend in labor income shares, ” april 2017 ; and g. michaels, a. natraj and j. van reenen, “ has ict polarized skill demand? evidence from eleven countries over twenty - five years, ” review of economics and statistics 96, no. 1 ( march 2014 ) : 60 – 77. 3 according to mckinsey & company, 46 per cent of tasks could be automated in the united states using current technology. in canada, the share is slightly lower ( 42 per cent ). see c. lamb, “ the talented mr. robot : the impact of automation on canada ’ s workforce, ” brookfield institute, june 2016. 4 data