, the results are no longer robust. all things considered, the size of fiscal multipliers seems to be subject to considerable uncertainty – both in general and with regard to the current situation. consequently, i think we should look beyond the size of the short - term fiscal multiplier when discussing consolidation. in general, if consolidation is achieved by reducing public spending, for instance, it will enhance potential growth. in addition, consolidation will foster fiscal sustainability. in this regard, it is important to consider how financial markets judge a country ’ s fiscal situation and translate the results in their risk assessment. there is widespread agreement that the influence of country - specific fiscal characteristics has risen over the course of the crisis. the current crisis is, to a large extent, a crisis of confidence – financial markets have lost their confidence in the sustainability of public finances. against this backdrop, sustained and credible consolidation would send a clear signal. also, with regard to political acceptance, i doubt that turning deferment of consolidation into a never - ending story will find more public support than a fairly swift correction. and this is why i believe that determined consolidation would help convince the markets that the future fiscal position is going to be sound. this, in turn, would bring down long - term interest rates or ensure that they remain at a low level, which would be beneficial for economic growth. by delaying consolidation, on the other hand, governments would risk an increase in market uncertainty. as a consequence, sovereign bond spreads would remain high or go up even further. 5. conclusion ladies and gentlemen high levels of public debt are one of the major economic policy challenges of our times – especially from a central banker ’ s point of view. sustainable public finances are a necessary prerequisite for a stable currency – a prerequisite that monetary policy itself cannot create. given that high levels of public debt also hurt economic growth, there is a solid case for consolidation. true, in the short run, consolidation can dampen growth ; that is undisputed. nevertheless, a credible commitment to sound public finances will also inspire confidence. and confidence is what is lacking in the euro area. thank you. bis central bankers ’ speeches references [ 1 ] auerbach, a. ; y. gorodnichenko ( 2012 ), fiscal multipliers in recession and expansion. in : fiscal policy after the financial crisis, nber. [ 2 ] bianchi, f. ; l. melosi ( 2013 ), dormant shocks

, such as job creation and improvement of incomes. for this reason, the inflation targeting framework retains the fundamental monetary policy paradigm of striking the optimum balance between inflation and output. apparently, when a central bank faces a dilemma of choosing between inflation and growth, inflation remains the priority. an example of this can be seen in the problems we faced last year, when world oil prices almost doubled. this disturbing trend became highly problematic for monetary policy because not only did it boost inflationary pressure, but also inhibit economic growth. many suggested that the central bank did not need to respond to this temporary surge in inflation. however, our view at the time was that despite the temporary nature of the disturbance, the inflationary impact emanating from the higher oil prices through increased price for other goods and services, such as transport and wages, would drive up core inflation. in this situation, the tight policy was necessary to prevent sustained escalation in public inflation expectations. the third characteristic of the itf is that monetary policy is implemented on a transparent basis with measured accountability. in my view, with elements like these, inflation targeting is more than a mere framework for monetary policy. inflation targeting promotes the good governance of a central bank. by announcing the inflation target to the public, the central bank commits itself to its achievement. uncertainty over future inflation will ease because public inflation expectations have a point of reference, and thus economic costs arising from uncertainty will also be reduced. communication to the public on the future monetary policy direction is also vital so that the public can anticipate the central bank monetary policy and to avoid ‘ surprises ’ that could trigger volatility in the money market. to strengthen policy effectiveness in this present age of disclosure, the central bank must also carry out a process of educating the public on what the monetary policy objectives are, the strategy for achieving these objectives, and what lies behind the decisions taken. one example involves the communication of the monetary policy response to soaring oil prices and risks from global imbalances at a time of weak conditions in the real sector and high unemployment. communications between the central bank and market players are also necessary, especially when financial markets are experiencing turbulence. in financial markets fraught with asymmetric information, the wealth of information held by the central bank is frequently of great benefit in mitigating this issue and thus preventing panic and herding by investors. in this regard, the credibility of the central bank is crucial. concluding remarks under the environment of financial integration, the task of