- term growth performance. they stimulate savings, capital formation, employment and innovation. and they facilitate the task of the monetary policy - maker in maintaining price stability. sound public finances should rely on automatic stabilisers, rather than discretionary fine - tuning, to dampen the cyclical fluctuations of aggregate demand. theory suggests that there are delays and risks associated with the latter - getting the timing wrong may result in pro - cyclical polices and make a monetary policy orientated towards price stability more difficult. in the medium term, fiscal policies can best contribute to sustaining non - inflationary growth by pressing ahead with fiscal consolidation. ultimately, over the economic cycles, growth will reflect conditions on the supply side of the economy. it is therefore microeconomic, and not macroeconomic, policies that can promote the supply of labour and capital and their efficient allocation, further innovation and the diffusion of new technologies, and as a result, mitigate problems such as structural unemployment. structural reforms in the labour and goods markets are a key element of any long - term strategy to improve investment, growth and employment prospects. first, more flexible markets increase the speed with which countries can adapt to economic shocks, thereby speeding up economic recovery. second, increased competition in labour and product markets is conducive to a high level of innovation and the rapid spread of technological progress. this in turn supports long - term growth, without contributing to inflationary tendencies. third, structural reform may facilitate the transmission of monetary policy. in more rigid economies, interest rate changes are transmitted to prices after a longer delay, and structural barriers can prevent the economic efficiency gains of the primary objective of monetary policy - price stability - from being fully realised. it is important to mention here the close interplay between rigidities in capital, labour and product markets, which can strengthen one another. these interdependencies mean that structural reforms in any one of these markets will have an impact on the functioning of the others. it must be emphasised therefore that only a comprehensive reform programme can create the necessary conditions for stronger economic dynamism. the need for structural reforms tends to become most urgent and evident to policy - makers during economic downturns. but don't forget that structural reforms do not provide short - term solutions to economic problems. although they can have positive short - term confidence effects, it normally takes time for their benefits to unfold. hence i cannot emphasise enough the need to speed up the pace of structural reforms in capital,

- fencing is an understandable outcome of the crisis, we must be aware of the fact that belgium is a country with excess savings. we would not be doing belgian banks a favor by forcing them to employ all of belgian savings within belgium. we will need to ensure that the new regulatory framework allows for an appropriate balance between limiting the risks associated with cross - border activities and allowing savings to flow to their most profitable uses. industrial organization and sifis. another dimension through which the future structure of the banking system may be affected is related to the treatment of sifis. the identification of sifis involves gauging, among other things, size, market shares, and the degree of interconnectedness between banks. limiting their size and interconnectedness, which sifis should have the incentive to do, will potentially lower concentration in the banking system and reduce the potential contagion that could result from a shock. risk management for systemically important banks will also likely differ from the past, as sifis will be required to formulate recovery plans and regularly update them. developing a recovery plan requires envisaging a series of scenarios involving severe shocks and the bank ’ s possible responses to those the potential in consultation with authorities shocks, as well as assessing effectiveness of these responses. the recovery plan process must be ongoing and integrated into the bank ’ s risk management procedures. this process should require banks to undertake more advanced planning for distress situations than in the past and should encourage a fundamental reflection regarding the rationale underlying the bank ’ s activities, complexity, and organizational structure. greater focus on traditional banking. several elements of the regulatory reforms ( e. g., liquidity requirements and increases in capital requirements for the trading book ) provide the incentive for banks to move more toward the “ traditional ” model of banking. while a requirement such as the ring - fencing of retail banking from investment banking proposed in the uk probably goes too far, a toughening of capital requirements for the trading book and greater alignment of capital requirements for exposures in the trading and banking book should give banks less incentive to take excessive risk through proprietary trading, thereby relying more on traditional banking activity. in smaller countries like belgium ring fencing retail banks would be rather counterproductive. the main victims of such a reform could be the sme ’ s. they need more sophisticated instruments than those retails banks can offer and they would be too small for investment banks. we have in belgium a strong model of universal banking. we