my view, the building blocks of any comprehensive plan of reform for europe are the following : implementing fiscal consolidation and securing the sustainability of public finances ; promoting sustainable growth and job creation ; enhancing the crisis management framework ; improving economic governance ; strengthening the financial sector. let me briefly elaborate on these points. iii. ( a ) implementing fiscal consolidation and securing the sustainability of public finances the financial and economic crisis has led to a very considerable deterioration in the fiscal positions of euro area countries, in terms of both large budget deficits and rising government debt. however, the economic recession amplified imbalances in fiscal policies that had built up gradually long before the crisis, reflecting the failure by many countries to implement sound fiscal policies during past periods of strong economic growth. on the institutional side, the eu ’ s fiscal framework, which is embedded in the stability and growth pact ( and that had been watered down in 2005 ), proved to be too weak to enforce fiscal discipline and was not implemented with sufficient rigour. as mentioned earlier, reflecting large fiscal imbalances and a loss of confidence on the part of investors, government bond spreads increased dramatically for some euro area countries and became very volatile in 2010. the willingness of investors to support governments ’ financing needs declined, with the result that the governments of three euro area countries have since then required financial support by means of joint eu / imf programmes. these programmes are subject to strict conditions on fiscal adjustment in order to restore public finances to health. however, the need to pursue more ambitious consolidation targets is more general. it is striking to see that there are currently only two euro area countries that are not subject to an excessive deficit procedure. fiscal consolidation is essential to ensuring an environment conducive to output growth and price stability. looking ahead, implementing fiscal consolidation and securing the sustainability of public finances are among the major challenges faced by policy - makers. the consolidation of public finances requires a comprehensive policy comprising : ( i ) the timely correction of excessive deficits ; ( ii ) the reduction of government debt to more sustainable levels ; and ( iii ) the reorganisation of banks in order to limit strong links between the balance sheets of governments and financial sectors, which typically result in the socialisation of banks ’ liabilities in times of crisis. these measures need to be complemented by pension and healthcare reforms to alleviate the fiscal burden arising from population ageing. bis central bankers ’ speeches moreover, fiscal governance in the euro area needs to be reinforced by means of the strengthening of the stability

##r disadvantage : network externalities, the lack of critical mass and switching costs. these factors make it important that innovation is tackled in a coordinated way and that an innovation - friendly legal and regulatory environment is ensured. it is important that these factors are considered when talking about innovation. still, in many constituencies, the strong persistence of cash usage may not be driven only by choice, but also – due to the factors discussed above – by the absence of choice. this is particularly relevant for the unbanked or underbanked population. innovation in retail payments might be a tool to increase financial inclusion – not only in the developing countries. absence of choice is also manifest in e - commerce / internet shopping. the ecb has observed that in many constituencies, the payment instruments offered for online payments are not those most suitable for remote payments. to give you a practical example, i would like to mention a web merchant in germany that offers either prepayment, cash on delivery or payment by sofortuberweisung ( an overlay service ). such slim choice and lack of competition is clearly an obstacle to the growth of e - commerce in europe, and i can only reiterate the eurosystem ’ s call for the banking industry to engage in the delivery of suitable sepa - wide online - e - payment solutions. otherwise, banks may run the risk of being crowded out by other providers that have already entered the market. at the same time, merchants – both in the virtual and in the brick - and - mortar sphere – should recognise that it is in their own individual and common interests to have a secure means of payment and to adopt the necessary measures. fostering competition : striking the right balance between cooperation and competition i would now like to discuss the prerequisites for fostering competition that benefits innovation in means of payment – and retail payments in general – through sepa. the eurosystem has argued from the outset that the harmonisation of standards and rules for retail payments is necessary to overcome the current fragmentation of payment instruments and infrastructure in europe. giving greater choice to european businesses and consumers, and opening up a larger market to payment service providers, will boost competition. the epc plays a pivotal role in this process, and therefore also has responsibility for bringing the requirements of the other stakeholders in sepa on board. it has always been clear that, as a network industry, payments can only be processed smoothly if common standards and rules are available. it is also clear that standards