. m. friedman ( 1967 ) “ the role of monetary policy ” ; the american economic review, vol. 58, no. 1 ( mar., 1968 ), pp. 1 - 17. those who attend the monetary policy forums of the south african reserve bank ( sarb ) will have heard requests, indeed demands, for such interventions at various times. logically, therefore, if monetary policy is to provide a stable background for the economy, it must do so by deliberately employing its powers to that end. 3. in all places : at all times? in stating the aforegoing, in free translation, i should not be misunderstood. i do not wish to imply that one monetary policy is always and everywhere appropriate. such a rendition of this narrative would do injustice not only to the principal author to whom i have referred but also to his antecedents, contemporaries and successors most of whom had and have, respectively, a keen sense of history. for it is the case that the political, economic, social and international environment of central banks is in constant flux. at the same time central banks are quite dissimilar in their constitutions. no two banks are exactly alike. 3 nor is it the case that the issues to be addressed are identical at all times in all places. the central proposition remains, however : it is that monetary policy can do certain things ; in particular, provide a stable background for the economy. in so doing, this policy will enable producers and consumers, employers and employees to proceed with full confidence that one aspect of an otherwise unknowable future is predictable : namely, the rate of price inflation, or its mathematical inverse, the purchasing power of money. 4 in these conditions, entrepreneurs can plan and act ; savers can save without fear that their savings will be wiped out by inflation and borrowers can borrow in orderly markets at interest rates that are not unduly raised by inflation risk premia. resolution of challenges in the real sector ; for example skills shortages or drought – induced agricultural losses requires other policies : stated differently as old people here used to say “ nobody can use another person ’ s teeth to smile ”. so to end the analogy, the teeth which will bring a smile to the resolution of those issues cannot be drawn from the mouth of monetary policy. 4. is price stability enough? but this surely cannot be enough. for we all are aware of the strained circumstances of the international economy in 2009 : and are no doubt cogni

from the process of catching up. a single currency will greatly enhance prospects for bringing in new industries, as the elimination of exchange rate risk will encourage firms to produce closer to their markets. large infrastructure projects already underway – and financed through the community support programmes – will improve competitiveness and provide a further inducement for firms to move to greece. it is therefore likely that the conditions after emu entry will be favourable to growth and employment creation in the greek economy. to argue that the incidence of country specific disturbances will diminish is not, however, to say that such shocks will disappear altogether. in those circumstances, in which a change in the exchange rate or national monetary policy would have been helpful, alternative adjustment mechanisms will have to be provided for responding to macroeconomic disturbances once national authorities have lost monetary and exchange rate independence. to achieve this it is assumed that greece would need growth of 3. 5 % a year, a cost of public borrowing of 5 %, and a primary budget surplus of 6. 7 % of gdp. it is also assumed that the general government takes on contingent liabilities and debt of public enterprises ( outside the general government ). at the macroeconomic level, it was argued earlier that, in the case of greece, public finances will have to regain the necessary room for manoeuvre to cope with adverse economic developments and country - specific disturbances. where structural adjustment, rather than mere macroeconomic stabilisation, is called for, an improvement in price competitiveness will be needed. this brings me to the crucial role of structural reform. structural reform on the structural front, there has been much progress in several areas over recent years and it is beginning to yield substantial benefits to the economy. but, given the breadth and the magnitude of the structural problems, much still remains to be done. i focus here only on a few selected issues where i feel that significant breakthroughs would make a major contribution to preparing the economy for the exigencies of monetary union. in particular, more stress needs to be placed on enhancing competition in product markets and improving labour market flexibility. greater market flexibility will not only allow greece to cope with country - specific disturbances more easily, but it will also, by reinforcing greece ’ s competitiveness, ensure a tension - free macroeconomic growth process and increase the employment - content of growth. although legislation was passed in 1998 aimed at addressing some key rigidities in the labour market ( the inflexibility of working time, wages, the ineffective