, undermines confidence in the prospects of the economy, weighs on greece ’ s credit rating and hinders the smooth exit from the current programme. the debt sustainability report by the institutions and the adoption of the medium - term debt restructuring measures by the eurogroup need to be made as soon and as clearly as possible, so as to further strengthen financial markets ’ confidence and ensure a smooth exit from the programme. 1 / 5 bis central bankers'speeches ( b ) consolidating confidence in order to ensure its return to the markets on favourable terms, greece must consolidate investor confidence in the continuation of reforms and convince that fiscal policy will not relapse once again in the wrong direction. the commitments made must be kept and decisive steps must be taken to continue reforms and privatisations, starting with the removal of obstacles to large investment projects that have already been agreed to, but are lagging. land - use legislation should play an important role in this area. ( c ) a smooth return to the markets after the end of the programme, greece will have to secure the funds required to cover its financing needs by resorting to international financial markets on sustainable terms. as already mentioned, the consolidation of confidence is a sine qua non. at the same time however, a financial safety net will need to be put in place to assure that greece is able to weather adverse developments that could temporarily drive borrowing costs up to unsustainable levels. the envisaged “ cash buffer ” is one such safety net, that would enable greece to avoid a recourse to the markets at times of heightened volatility and high refinancing costs. this cash buffer is currently being built up with the trial bond issues before the end of the programme, as well as with disbursements from the european stability mechanism ( esm ). however, episodes of financial markets turmoil such as the recent ones appear to have a greater impact on countries with poor credit ratings and a weaker economy. these countries saw the yields on their government bonds rise considerably. this suggests that, in the present uncertain conditions, the greek state ’ s return to the markets, as necessary as it may be for a return to normality, must proceed with caution. international experience has shown that trial bond issues for the purpose of creating a sound cash buffer prior to the expiry of a programme helps bolster confidence and paves the way to the exit from the programme. nevertheless, the need for a complementary preca

rate to fall to between 6 and 6 - 1 / 4 percent in the fourth quarter of this year and to decline to between 5 - 1 / 2 and 6 percent in the fourth quarter of 2004. again, these values are broadly consistent with the more recent private - sector forecasts. in particular, the private - sector forecasters and fomc members evidently agree that strong gdp growth will only gradually erode the accumulated slack in the job market. simple arithmetic tells us that all the forecasters are expecting much of the projected increase in output to be met by ongoing increases in labor productivity, rather than by substantial new hiring. this point is a crucial one, to which i will return later when discussing inflation projections. i should tip my hand at this point and say that i personally find the real growth and unemployment forecasts just described to be broadly reasonable, though there are important risks. in particular, i have been of the view for quite a while that acceleration of growth to 4 percent or better in 2004 is plausible ; and i agree also that the decline in the unemployment rate, though steady, is likely to be slow. why do i believe that there are grounds for optimism about economic growth, even as more caution is warranted regarding unemployment? the consumer plays a central role as always, and recent news on retail sales ( including automobile sales ) and housing starts and sales, among other data, suggests that household spending continues to hold up well, as it has throughout the past three years. tax cuts, signs of stabilization in the job market, and rising stock prices are among the factors that should keep the consumer in the game as the recovery proceeds. what makes the situation today feel particularly encouraging, however, is that we may finally be seeing some signs of a revival in business investment. because i see the strength and sustainability of that revival as the key to the forecast, i would like to discuss it in a bit more detail. in a speech i gave to the forecasters'club last april ( bernanke, 2003a ), entitled “ will business investment bounce back?, ” i pointed out that the recession that began in march 2001 is distinctive in being one of the few business - led - as opposed to household - led - recessions of the post - world war ii period. in particular, a sharp decline in business investment spending that began in the second half of 2000 was the proximate cause of the recession. by the same token, i argued in my earlier speech making a