be compared to a walking man, who has to stand firm on both legs. should one of the legs fail to respond in a timely and coordinated way for whatever reason, many adverse consequences would inevitably follow. although fiscal policy is of course extremely useful in many respects, i am quite skeptical as regards this specific feature that is so important for the elaboration of an appropriate policy mix, namely the stabilisation properties of an active fiscal policy geared towards macroeconomic fine - tuning. this “ leg ” seems quite unreliable to me, for several reasons. first of all, experience shows that fiscal impulses are frequently implemented too late, after the occurrence of the shock. these delays simply reflect a time - consuming decision - making process. let me draw your attention on the various steps involved : the identification of the problem, the elaboration of the required measures, the discussion of these measures and their political adoption, their implementation and the time it takes before they exert an impact on aggregate demand. there are many examples of allegedly contra - cyclical policies that turn out to exert a procyclical impact on the economy because of the time lags involved. in these circumstances, fiscal impulses could contribute to magnify economic cycles. in addition, long and variable delays increase the uncertainty about the impact of discretionary measures on the economy. this “ impact uncertainty ” will increase the uncertainty for economic agents and monetary policy - makers. furthermore, any stabilisation policy has to be conducted in a symmetrical way in order to avoid a systematic drift in the level of public expenditure. this condition is unfortunately difficult to fulfill, because many expenditure items are not flexible downwards. they could be increased in an easy way when the policy mix requires an expansionary fiscal policy, but a decline of the same magnitude will in all probability not be implemented when a restrictive stance becomes more appropriate. let me give the example of luxembourg to illustrate the validity of this point. the compensation of employees and social transfers - two expenditure categories characterised by a weak downward flexibility for evident reasons - jointly account for about 70 % of total general government expenditure. on a priori grounds, only the intermediate consumption of general government could be used in a symmetric way and in a timely manner, but this expenditure item does not account for more than 3 % of gdp. in addition, it is split between the central government and local governments, which would also require a close co - ordination between these two entities. the weak magnitude of fiscal multipliers

pension systems, like luxembourg and greece. indeed pension reforms have been enacted in most countries of the ec and in half of them appear to have curtailed significantly the projected increase in public spending on pensions. pension spending appears to be most sensitive to changes in life expectancy that rip apart the actuarial equilibrium of pay - as - you - go schemes. these pension schemes are nationally grown and closely associated with the history and culture of a society. i will first try to examine why the most generous systems seem to be the most resistant to change, then go through some of the arguments used against reform and finally establish a scoreboard of possible reforms. i. resistance to change according to the e. c. the largest challenges on pension expenditure in the eu are faced by portugal, luxembourg and spain. greece is however missing in the statistics. within the new eu countries cyprus, slovenia, hungary and the czech republic would face the biggest challenges. among these countries the oecd 2007 report “ pensions at a glance ” ranks the countries according to the generosity of pension promises. different retirement - income indicators put greece and luxembourg at the top. gross pension replacement rates in the oecd tend to be the lowest in the six mainly english - speaking countries with stronger neoliberal influences. they are the highest in the five southern european nations, greece, italy, portugal, spain and turkey. if we look at the low earners the highest replacement rate is found in denmark, while among the high earners greece offers the highest pension reflecting both a high accrual rate and a high ceiling on pensionable earnings. 1 ) this shows the first problem for reform. pension schemes tend to mix an insurance policy for the level of living with social policy with redistributive elements. the border line between these two elements is not clear, but is fertile ground for inconclusive discussions. whether the efficiency of the redistributive element beyond the level of a safety net is to be gauged is another question. in denmark a low - income worker earns more once a pensioner than during his productive life. in other countries, the spectrum of benefit design is more oriented towards an insurance scheme which aims to pay the same replacement rate to all workers when they retire. this table shows that the most generous schemes are actually closer to insurance schemes and the need for actuarial equilibrium is therefore all the more necessary. but inevitably pensions interact with tax. therefore the better measure might be net replacement rates.