monetary policy stance will continue to support the recovery in the euro area, it is essential that fiscal and structural policies strengthen the prospects for economic growth over the medium term. as regards fiscal policies, the european commission ’ s 2013 winter forecast reflects progress in reducing fiscal imbalances in the euro area. the euro area - wide general government deficit is expected to have declined from bis central bankers ’ speeches 4. 2 % of gdp in 2011 to 3. 5 % of gdp in 2012 and is projected to be reduced further to 2. 8 % of gdp this year. governments should build on this progress with a view to further restoring confidence in the sustainability of public finances. at the same time, fiscal consolidation must be part of a comprehensive structural reform agenda to improve the outlook for job creation, economic growth and debt sustainability. in the view of the governing council, it is of particular importance at this juncture to address the current high long - term and youth unemployment. to this end, further product and labour market reforms are needed to create new job opportunities by supporting a dynamic, flexible and competitive economic environment. we are now at your disposal for questions. bis central bankers ’ speeches

i want to make. even if a central bank is actually independent from the government, it cannot over the long term act in direct contradiction to the preferences of society. for example, if the population is not averse to modest inflation, the central bank will have a hard time imposing an ultra - low - inflation environment, with all the associated costs and benefits, over the long run. the experience of the czech national bank, perhaps, serves as a case in point, although in the opposite direction. in general, czechs despise inflation, and the central bank needs to explain repeatedly why it uses the worldwide standard of a 2 % inflation target instead of targeting literal stability of the cpi level, or 0 % inflation. already many decades before the era of independent monetary policy, in the early 1920s, czechoslovakia pursued a strategy of deliberately strengthening the national currency. this policy resulted in deep deflation, in strong contrast to the hyperinflations seen at that time in neighboring countries ( austria, germany, hungary, and poland ; see sargent, 1982 ). so, it comes as no surprise that the czech national bank is rarely applauded for cutting interest 1 / 2 bis central bankers'speeches rates, while hikes are often welcomed by a majority of the population. an important publicrelations test arose for the bank in 2013, when interest rate cuts proved insufficient to return inflation to the target. inspired partly by one distinguished member of today ’ s panel, the czech national bank adopted an exchange rate commitment to keep the currency from appreciating. the commitment was terminated a year ago. since then, studies by the imf and academics alike have pointed to large benefits of the policy in terms of reducing unemployment, lifting gdp growth, and preventing deflation. within two years after the commitment ’ s enactment, the czech republic – at least in part thanks to the commitment – turned from a de facto sick man of europe to one of the fastest - growing economies with the lowest unemployment rate in the entire eu. when i attend conferences and seminars at other central banks, my foreign colleagues often assume that such a policy must have been tremendously popular. indeed, the economics behind it is straightforward, and the resulting boost to peoples ’ wages is hard to deny. in spite of that, the exchange rate commitment caused the sharpest ever deterioration of public confidence in the czech national bank : from around 75 % to around 50 %. confidence only recovered after the commitment was terminated. these were precisely the times