has been successful in fighting inflation because politicians were wise enough to make the bundesbank independent. at the same time the german experience ( along with the experience in many other countries ) shows that the lack of fiscal rules may lead to ever increasing public debt. hence, the institutional set - up for emu, which comprises not only an independent ecb and independent national central banks but also the stability and growth pact, can be seen not only as an adoption but also as an improvement of the german practice before the introduction of the single currency. this approach should lead to a more sustainable path of public finances and will hopefully limit conflicts between fiscal and monetary policy. with this hope i would like to conclude my opening remarks.

package contains a number of important measures along these lines. this is particularly true with regard to labour market policies. unemployment assistance will be curtailed, the period for claiming unemployment benefits will be shortened, incentives to work in the low - wage sectors will be established and dismissal protection rules will be eased. we hope that the ongoing reform debate brings about far - reaching results that will strengthen growth and employment. i am convinced that many of our reform proposals would also be helpful in achieving budgetary consolidation. 3. fiscal consolidation the debate on fiscal consolidation and the stability and growth pact can be viewed as the third part of the current backdrop to our conference. as you know, the deficit ratio in germany clearly exceeded the 3 % limit last year and is expected to do so again in the current year. under these circumstances, it seems quite obvious that scope for discretionary loosening does not exist. in fact, those member states of the eu with large deficits are currently in a fiscal trap ; they have virtually no room for manoeuvre if they do not wish to violate the maastricht treaty and the stability and growth pact. this state of affairs cannot be blamed on the european treaties, which envisage sufficient fiscal flexibility as long as a balanced budget in underlying terms is achieved. instead, the main reason for this situation is that these countries did not sufficiently consolidate their budgets while their economies were performing more favourably. in our view, the relevant european authorities have found an acceptable compromise on this matter. those countries with budgetary imbalances are to reduce their structural deficits by at least ½ % of gdp each year, but otherwise allow the automatic stabilisers to take effect. for germany, the ecofin council required a structural consolidation of about 1 % this year. the main conclusion for germany is that there is virtually no scope for stimulating fiscal action. the government has envisaged a budget “ close to balance ” in 2006 in line with the stability and growth pact. the overall structural deficit ratio stood at almost 3 % in 2002. given that a deficit ratio of ½ % of gdp is tolerated and including shortfalls resulting from tax cuts in 2004 and 2005, the structural consolidation requirement stands at about 3½ % of gdp within four years. if this is to be achieved solely through the spending side ( as it should ), nominal spending of federal, regional and local government has to remain more or less unchanged between 2003 and 2006. that is an extremely ambitious target - particularly taking into account