structural reforms aimed at enhancing competition, flexibility, efficiency, and productivity. the reform process takes time, and so a medium - term, comprehensive approach is crucial to anchor expectations and maximise the positive effects of adjustment in the short - term. the greatest challenge today is to maintain reform momentum and implement fully those changes which have already been announced or even enacted into law. concretely, this means, for the labour markets, addressing the bis central bankers ’ speeches remaining insider - outsider dualities and enhancing labour mobility, including across borders. for product markets, the key challenge is to open up regulated professions and network industries that are sheltered from competition by government regulations. this requires a simplification and streamlining of regulations, a reduction of barriers to entry and limits to competition, a resolute deepening of the single market in europe. going forward, structural reforms also need to go into the government sector itself. in several euro area countries, modernisation of public administration is essential to increase efficiency in the provision of public goods, like infrastructure, and essential services, like civil justice. this will also support fiscal consolidation, by reducing the size of the government sector. second, the euro area needs to persevere in fiscal consolidation efforts and reduce steadily the government debt ratio. despite the important progress on fiscal consolidation, debt ratios have yet failed to stabilise in most euro area countries, as improvements in primary balances were outweighed by the debt - rising impact of unfavourable developments in interest - growth differentials and deficit - debt adjustments. the euro area government debt ratio is projected to rise further to above 95 % of gdp in 2013 – far above the 60 % maastricht reference value – with debt ratios displaying large differences across countries. further adjustment is thus inevitable, and unfortunately it must take place in an environment of rising consolidation fatigue. five years into the crisis this rise in consolidation fatigue is understandable. going forward, it will be important for policymakers to communicate effectively both on the need for further adjustment and how this adjustment will be distributed in an equitable way across different groups of the population. in this context, it is necessary to review consolidation strategies that have relied predominantly on tax rate increases, exacerbating the burden on already compliant taxpayers, without much broadening of the tax bases. such an approach has had substantial negative effects on disposable income and demand, at the same time raising resistance and negative reactions in the electorate, based on inter - temporal

the very beginning. but we think that as far as the corrective arm of the pact is concerned it is important to fully preserve the nominal benchmark of 3 % deficit and the integrity of the excessive deficit procedure. the commission proposes. the council will decide. it was, and it is, our duty to say what we think taking into account the crucial importance of the stability and growth pact for the cohesion of economic and monetary union. in any case, whatever the decision is we will be faithful to our mandate and maintain price stability. [ question ] in this context of low growth and low output, the fact that the population is ageing plays an important role too. is that a factor that the ecb takes into consideration? [ answer ] that is a very important feature. in many euro area countries we are seeing a gradual increase in the less dynamic and less active part of the population, which in general leads to a fall in consumption and investment with the resultant negative effect on the economy. that is another reason why reforms of the health and pension systems and the labour market are crucial. in some countries, specific policies have been adopted to correct this demographic trend. [ question ] of course, low growth in productivity also has an impact on inflation. [ answer ] of course. low growth in productivity means higher unit labour costs. cost - generated inflation tends to rise, and that certainly does not make the ecb's task any easier, given that our job is to maintain price stability within the monetary union. [ question ] on the subject of inflation, the ecb has estimated the euro area's non - inflationary potential growth rate to be between 2. 0 % and 2. 5 %. can you confirm that estimate? [ answer ] the ecb relies in this field also on assessments of market economists ’ consensus and on analyses conducted by other major international organizations. we have noticed that this estimate has been revised downwards recently. if i were to mention a figure today, i would say that a number of estimates are getting closer to 2 % than to 2. 5 %. [ question ] drawing to a conclusion this structural analysis of the european economy's problems, allow me to ask you one more question on the economic climate. what is the ecb's forecast for growth in europe in 2005? is the monetary institute optimistic? [ answer ] we are neither optimistic nor pessimistic. rather we are realistic and humble in front of facts and figures. the ecb