rise for months. this is undoubtedly an important factor that explains the different trajectories of the baltics and certain southern european countries. but fiscal consolidation alone would not have allowed the baltics to exit the crisis so swiftly. the ecb has long argued that the potential trade - off between fiscal discipline and growth can be mitigated if consolidation is accompanied by growth - enhancing structural reforms. the case of the baltics confirms this. from a political economy perspective, the latvian experience also shows that a critical mass of structural reforms is helpful to overcome vested interests. education, health care, central administration : hardly any public sector category was spared by the reforms. combined with targeted social safety net measures, this comprehensive approach helped the government to foster public acceptance of change. at the same time, the quality and long - term sustainability of the reforms may – at least initially – have suffered from this approach. structural reforms are not just about across - theboard cuts but are much more complex and multifaceted. their overarching objective should be to create a favourable policy environment for growth and wealth creation. but they should also bear in mind equity considerations. in that regard, the imf, the european commission and the world bank provided valuable advice and support to latvia. i am convinced that we europeans can and should also step up our technical assistance to countries in need. the fiscal compact and the two - pack can provide a good basis for that. to be effective, they should be implemented in a spirit of mutual trust by the member states and the european commission. last but not least, an important lesson from the baltics relates to the existence of a broad consensus in society. in my view, beyond economic specificities, the key difference between, say, latvia and greece lies in the degree of national ownership of the adjustment programme – not only by national policy - makers but also by the population itself. i cannot but emphasise this again : national ownership and public support for the adjustment programme – these are key lessons from the latvian experience which are of the utmost relevance to the current situation in greece. in that regard, the communication policy of the government plays a crucial role. this is what a responsible government ought to do : bis central bankers ’ speeches • to state that the adjustment is for the country ’ s own good, and not just to please international lenders ; • to tell the hard truth ; • to explain what needs to be done ; • to be clear what the consequences of non - action

pressure on their currencies. it is worth noting, however, that this phenomenon is not generalized, because current - account deficits have remained fairly bounded. in the overall group of emerging economies, capital inflows are today close to where they were during mid1990s, and certainly below the levels of 2006 – 2008. however, outflows from these economies largely exceed those of the 1990s, resulting in a near - zero net balance ( figure 9 ). chile is not so different, with even negative net balances ( figure 10 ). besides, the structural conditions of our economy and the policy framework are not those of the 1990s. for instance, interest rates paid on indexed central bank instruments are now less than half ( figure 11 ). the opportunity of high short - term returns, that are normally associated with massive flows of this kind of capital, is probably not so obvious anymore in our economy. the possibility that increased capital flows may stimulate unhealthy growth in lending is another cause for concern. the data do not show for the moment that credit is growing fast. it is actually on a flatter slope than it was in the 1990s and that of other emerging economies bis central bankers ’ speeches that have adopted measures to control capital inflows ( figure 12 ). still, it is important to be on the watch for excess flows that might incubate financial fragilities and exacerbate economic cycles, in which case it could be necessary to review financial regulations in place to avert any costly imbalances. recent monetary policy decisions the scenario outlined in the latest monetary policy report assumes that in the coming quarters the chilean economy will grow in line with its potential. this will allow trend inflation, today in bounded levels, to converge and remain around the 3 % target in the coming quarters. to achieve this objective, we have withdrawn some monetary stimulus, bringing the monetary policy interest rate ( mpr ) closer to the neutral range. although this is the baseline scenario, the report also indicated that inflation ( and growth ) risks were biased upward. for inflation, arguments were based on the combination of adverse supply shocks in energy and foodstuffs, the closing of output gaps and the strong dynamism of the domestic demand. some of the aforesaid risks have eased. private inflation expectations have moderated, consistently with mpr adjustments and the recent decline in oil prices and other commodities ( figure 13 ). anyway, commodity markets remain volatile, so it is premature