our growth potential in the future. it goes without saying that household debt, which has increased greatly in the course of accommodative macroeconomic policy operation to support the recovery of economic growth, is a major risk factor in the economy. externally, there are also various latent factors in existence that could negatively affect the korean economy. it is not easy to rule out the possibility that the sluggishness of our exports could continue into the second half of this year, in line with china ’ s economic slowdown and import substitution strategy and with the weakened price competitiveness of korean companies due to the depreciations of the japanese yen and the euro. we also need to be mindful that the uncertainties surrounding the us federal reserve ’ s monetary policy normalization and the renegotiation of greek debt could heighten financial market volatilities at home and abroad. dear fellow members of the bank of korea family, bis central bankers ’ speeches given these conditions, there are numerous issues that the korean economy needs to address. among them, i would like to talk briefly now about the tasks that the bank of korea needs to focus on as we move into the second half of this year. first, since it is difficult to be sanguine about the domestic economic recovery continuing, monetary policy should be operated in such a way as to keep our accommodative policy stance in place. even though the policy environment may change rapidly after the interest rate hikes by the us fed going forward, i believe we need to be cautious when adjusting our monetary policy stance should the economic recovery prove to be inadequate. meanwhile, since there are massive uncertainties surrounding conditions at home and abroad, we need to work to heighten the effectiveness of our monetary policy by striving to increase the accuracy of our assessments of the economic situation and our economic forecasting, and send consistent policy signals to economic agents. we should in addition strive to more effectively operate our bank intermediated lending support facility, which has been greatly expanded to support the economic recovery and boost the growth potential. inflation is expected to gradually rise in the second half of this year. however, with consumer price inflation still low, due largely to the effects of the low oil prices, there is a possibility of concerns about deflation being continually raised for some time to come. and so we should work to prevent the spread of these concerns by accurately checking and analyzing price conditions, and adequately explaining them to the general public. in

- seated tradition of stringent safeguards for private property and the legal system itself have further curbed redistribution trends in the us. even the united states ’ federal structure may have helped to restrict the role played by central government in budget policy. the eu member states ’ constitutions, on the other hand, tend more towards the principle of proportional representation, which some consider to be in favour of universal programs designed to benefit various groups and thus higher government spending. 25 it is common knowledge that, in an effort to avoid the pitfalls of unsustainable budget policies, the maastricht treaty and the 1997 stability and growth pact lay down the conditions necessary for safeguarding budget discipline within a monetary union. the pact ’ s underlying philosophy in the budget field is that countries must structurally pursue breakeven budgets or a budget surplus, in order to then allow automatic stabilisers to function without any restriction. this institutional setup, comprising constraints of an almost constitutional nature in the field of budget policy, is different from that in the united states where tax regulations are in some ways more flexible, although they have been much altered in recent decades. it has been repeatedly proposed to introduce a break - even budget rule in the united states, but it has not happened yet. another example of the importance assigned to discretionality over regulations in the united states can be seen in the fact that, while the overall debt is nominally subject to a ceiling approved by congress, that ceiling is in fact regularly modified, thus in actual fact it is not binding at all. for example, the deficit targets established in the 1985 budget and emergency deficit control act ( gramm - rudman act ) were abundantly breached and later relaxed. in light of this, the 1990 budget enforcement act ( bea ) introduced restrictions to the discretionary component of expenditure and ground rules designed to restrict spending to real revenue ; on the basis of those rules, any new discretionary spending ( apart from the legislation on social security and revenue ) was to have a neutral impact on the budget. thanks to this method, a positive budget balance was achieved and maintained for a certain amount of time under the clinton administration. yet the deficit ’ s disappearance proved short - lived ; negative balances were repeatedly recorded in the wake of the taxation and spending policies adopted by president bush ’ s administration. 3. 4. 2 the economic structure moving on to the deep - seated differences in economic structure, a crucial difference between the united states and the euro area lies in the far