provision of the necessary liquidity to eligible counterparties, against adequate collateral, on the basis of a fixed rate and full allotment procedure. when tensions emerged in the financial markets after greece requested financial aid in april 2010, the eurosystem also activated a securities market programme which is intended to facilitate the monetary transmission mechanism. this involves secondary market purchase of government bonds of a number of euro area countries, and the programme was broadened in the summer of this year to cover purchases of securities of other countries facing funding difficulties. apart from instituting financial mechanisms, european authorities responded to the sovereign debt crisis by also focusing on reform in economic governance. clearly, the macroeconomic imbalances that developed in a number of member states, together with the ineffective implementation of the stability and growth pact, signalled a need to strengthen the surveillance framework. in addition to the setting up of the european systemic risk board, entrusted to monitor financial stability, the european commission presented six legislative proposals, the so - called six - pack. 4 these were aimed at strengthening the preventive and corrective action needed to ensure fiscal sustainability, reducing macro - economic imbalances, and promoting competitiveness. they were approved by the european parliament in september and will come into force in january 2012. in launching these measures the european authorities recognised that in a single currency area there are limitations to the debt that can be issued by participating sovereign member states. essentially, we are going through a period of further development of the currency union and the implications this has on other aspects of governance. lessons from the crisis from a national perspective, at the policy making level, there are a number of lessons that can be learned from the sovereign debt crisis. as i highlighted earlier, macroeconomic imbalances and unsustainable fiscal policies were the root cause of the sovereign debt crisis in europe. the example of ireland is a reminder that while strong gdp growth is a desirable goal, what ultimately matters is that such growth can be sustained. in turn, competitiveness is the key for a country ’ s success in achieving sustainable growth and improvements in living standards. see european commission, eu economic governance “ six pack ” – state of play, brussels, 28 september 2011. bis central bankers ’ speeches in malta gdp per capita grew by 11. 6 % over the last decade while the increase in the euro area amounted to 5 %, and the recession in 2009 was shorter and relatively less deep than that experienced by malta ’ s trading partners. the maltese economy,

this may be the time to follow the lead of other countries and consider the adoption of self - enforced regulations, such as expenditure rules. 5 spending decisions involve the reconciliation of various spending needs. while it is the cabinet of ministers that collectively sign off on the budget, the compilation of the budget document involves the reconciliation of diverse demands. if, as is likely, the sum of the separate demands exceeds the previous year ’ s spending total, the end result is the observed and inefficient upward creep in total spending. a widening of the deficit is more likely when growth in tax revenues is constrained by the slow rate of economic growth. spending rules can be viewed as a remedy for the problem of coordination between competing interests. in addition the formulation of the rules requires the setting of spending priorities. for example, it would be reasonable for an expenditure rule to give priority to capital expenditures, while another rule prioritizes the various types of social spending. the choice of the rules will involve the difficult task of setting of priorities, but once the rules are determined, there will be considerably less discretion on the overall fiscal outcome of the yearly budgetary exercise. for example, to remain within the rule, spending cuts may be necessary in some areas to allow a larger outlay in a higher priority area. this kind of tradeoff is an essential feature of budgetary management. expenditure rules are also helpful for the purpose of assuring long - term budget sustainability. in this regard, the reform of the pensions system requires particular consideration. as things stand, the gap between pension contributions and benefits is of concern. the financial estimates for 2012 include an amount paid by government to top up the contributions of employers and employees in the private sector. while such an arrangement was understandable in the early phase of malta ’ s economic development, it is less justified today. over 145 million euros are earmarked in 2012 for this so - called direct contribution by government by way of a grant to the private sector in terms of the social security act of 1987. the total top up for both public and private sector employees comes to just over 191 million euros. this amount is in addition to the national insurance contribution by the government in its capacity as an employer. to put these numbers into perspective, one must keep in mind that the deficit in the consolidated fund for the same year is projected at roughly 145 million euros. the size of these outlays should be of concern for two reasons. the shortfall is certainly not arising from pension