##s occurring, and therefore contributes significantly to favourable financing conditions for the private sector. at the same time, it allows an appropriate medium - term orientation of fiscal policy which fosters confidence and thereby growth. in order to fully reap the benefits of this framework, it is important that countries respect its objectives and implement appropriate consolidation plans where needed. hence, the commitments made in the stability programmes and the requests to further improve fiscal positions, as subsequently agreed in the ecofin council, must be met in full. these benefits would be magnified if the underlying policy measures were part of a comprehensive reform strategy to support economic growth. it is, in fact, the implementation of structural reforms at the micro level that ultimately raises the production potential, improves flexibility in the economy and makes the euro area more resilient to external shocks. clearly, lack of progress in structural reform is one of the key factors currently hampering a recovery in confidence. therefore, the governing council welcomes a recent communication by the commission on the implementation of the broad economic policy guidelines. it emphasises the need to step up the pace of labour market reform to achieve the lisbon objectives, to fully implement the internal market and to enhance competition in product markets as well as to foster capital market integration, entrepreneurship, a knowledge - based economy, and research and development. we fully share the commission ’ s assessment that policy inertia and backtracking are widespread. against this background, renewed momentum in the process of structural reform will be crucial to foster confidence among consumers and investors.

the stock market. in other words, the snb basically does not select individual equities. instead, we use rule - based procedures to invest in a very broad equity universe. at present, the snb holds some 6, 000 securities in more than ten currencies. the equity universe on which our equity investments is based covers some 90 % of global market capitalisation. we mainly invest in mid and large cap companies. this makes sense, particularly in view of the special liquidity requirements i have already mentioned. in addition, we also place funds in small cap companies. in terms of market capitalisation these holdings only account for a small portion of our equity portfolio, but in numbers they make up about three - quarters of all the securities we hold. this, too, shows the breadth of our equity universe. when selecting our equities, we use a benchmark. this is a combination of various commonly used indices, assembled by us. as soon as we have determined the benchmark, equity investment becomes a largely automatic process. why does the snb not make targeted investments in individual companies or sectors where an above - average return can be expected? in other words, why do we not engage in stock picking? warren buffett is quoted as having said, wide diversification is only required when investors do not understand what they are doing. i can assure you that our investment specialists have an excellent understanding of what they are doing. however, we choose to have recourse to a broad equity universe for the following four reasons. first, we achieve a greater diversification effect within the equity segment by investing as widely as possible, across both regions and sectors. second, it should not be our objective to enforce strategic or, indeed, political interests by means of our investments in individual companies. this could limit our monetary policy room for manoeuvre and would also make our position vulnerable. due to the size of our foreign exchange reserves, the snb could quickly acquire large shares in companies, and this might be misconstrued as strategic participations in the event of active management of our equity holdings and corresponding overweightings in some areas. our strategy ensures that holdings in individual companies remain low. third, through a passive strategy we can minimise our market influence, since our policy does not cause us to give preference to individual securities or sectors. fourth, our investment horizon is very long - term, that is, it spans several business cycles. the academic literature shows that