of this, without the rescue packages to which germany has made a decisive contribution, the adjustment process would inevitably be even more arduous and abrupt. the crucial factor is that this adjustment process is already underway : unit labour costs in the deficit countries are on the decline, considerably so in some cases, and germany ’ s current account surplus with the rest of the euro area at the end of 2011 was only just around one - half of the just over eur 100 billion back in the year 2007. structural reforms, including labour market measures, are a major underpin of this process. as the reforms usually affect large sections of the population, they initially often come at a high political and social cost. however, the answer to this problem cannot be to drip - feed the adjustments over time ; on the contrary – making a quick, clean break is better for swiftly reaping rewards and opening up prospects for the future. 4. conclusion efficient labour markets are a key factor in overcoming the crisis. decisive action must therefore be taken to tackle the prevailing deficits so as to enhance the growth potential of europe as a whole. by contrast, calls from various quarters for an artificially induced deterioration of competitiveness in the surplus countries, macroeconomic fine - tuning or a simple redistribution of burdens would be of no help to europe ; in fact, quite the opposite. policymakers are thus called upon to do their bit at european level and in the member states. and monetary policy is called upon – not to alleviate the failures of policymakers in resolving problems, but to continually reiterate that ensuring price stability is the primary and most important contribution of monetary policy to the stability of the monetary union. it must continually reiterate that this contribution can only be made by central banks that are institutionally and de facto independent and have a clearly defined mandate. with this brief and – some will certainly think – obligatory warning against the misappropriation of central banks, i shall leave the matter there – as a bundesbank official, i hope you will forgive me for this “ ceterum censeo ”, or mantra. thank you very much for your attention. i now wish you a pleasant and stimulating evening at the deutsche bundesbank ’ s reception. darvas, zsolt ( 2012 ) : “ intra - euro rebalancing is inevitable, but insufficient. ” bruegel policy contribution 2012 / 15, august. bis central bankers ’ speeches

that labour market reforms need time to take their full effect. the measures introduced in particular in spain, italy and greece will not lead to full employment overnight, especially as the devil is often in the detail. it is therefore not certain whether the changes adopted so far are enough to increase the flexibility and performance of the labour markets there sufficiently. however, the reforms must lead in the medium term to “ light at the end of the tunnel ” on the labour market. pessimists who deny the possibility of a turnaround in the crisis countries are currently having a field - day. however, if we remember the state of the german labour market as recently as the middle of the last decade, few would have dared to hope for the development emerging in subsequent years. the external environment was naturally favourable at that time and the starting point was not as serious as that currently faced by other countries. i believe that the crucial lesson is that with appropriate measures the functioning of the labour market can be changed so that this per se, in a very broad economic framework, allows more opportunities and thus also a more favourable employment trend. 3. germany ’ s contribution to reducing imbalances the aim must be for europe as a whole to emerge stronger from the crisis. but in the discussion on macroeconomic imbalances, there are often calls to force the core countries to actively reduce their current account surpluses – through interventions in the wage discovery process, for instance, or by way of additional fiscal stimuli – so as to bring relief for the deficit countries. i won ’ t beat around the bush here : besides the fact that narrowing the problem down to an analysis of current account balances is, in itself, unfortunate, to say the least, this michael krause and harald uhlig ( 2011 ), “ transitions in the german labor market : structure and crisis. ” deutsche bundesbank discussion paper series 1 : economic studies no 34 / 2011. bis central bankers ’ speeches path would do a disservice to europe. after all, the euro area is not an island but a region competing with the usa, japan or china. what is more, fixing one ’ s sights on a greater contribution by germany overlooks the reality of the situation. firstly, germany ’ s trade surplus with the euro area is less than 2 %, 2 and secondly, boosting demand in germany would trigger only negligible spillover effects in the periphery countries. this is also confirmed by imf research. on top