benefits that are too generous. secondly the amount of the welfare gap as identified in the estimates is going to rise rapidly as people live longer and the population ages. one suggestion for alternative financing would involve a multi - year programme that would reduce the government ’ s matching contribution gradually over an extended period of time, ideally through a tripartite consensus at the mcesd. this programme would be financed from productivity growth. during times of economic growth, when the growth rate exceeds a particular threshold, the revenue from a marginal increase in income tax or national insurance rates would be earmarked to reduce the subvention. the increase in rates would automatically be suspended during times of slower growth. such a scheme would be justified as one which reallocates resources from current to future consumption, and the reallocation would occur only during a time of relative prosperity. see f. holme - hadulla, s. hauptmeier and p. rother, “ the impact of numerical expenditure rules on budgetary discipline over the cycle ”, ecb working paper series no 1169, april 2010 ; see s. hauptmeier, j. s. fuentes and l. schuknecht, “ towards expenditure rules and fiscal sanity in the euro area ”, ecb working paper series no 1266, november 2010. bis central bankers ’ speeches while this on its own would not ensure the sustainability of the pension system, it would be an important component in the process of pension reform, and, as i have already mentioned, i would suggest that it would be appropriate for deliberation at the mcesd. the phenomenon of population ageing raises sustainability challenges also for the public provision of healthcare, which represents a significant share of government expenditure. it must be recognised that the extent of provision of free healthcare and other services by the state must ultimately be financed by the taxpayer. the earmarking of certain revenue measures or particular revenue streams for this purpose may also be an appropriate topic for consideration by the social partners. the sustainability of funding the government ’ s capital expenditure programme, particularly in relation to the infrastructure and the public utilities through fiscal resources may also have to be reviewed. one step in this direction is to harness the ample immovable property of the government which presently may not be rendering an adequate return. it appears that the setting up of special purpose vehicles may be addressing in part this issue. perhaps, however, we should go a step further by considering the establishment of a

area banks, reviewing the collateral framework, lengthening the maturity of operations to three years, and reducing redenomination risk in financial markets through the announcement of outright monetary transactions. over the longer term, further decisive steps are needed for the establishment of a genuine banking union, so as to further enhance the resilience of the banking sector, reduce financial fragmentation, and strengthen the institutional framework of the euro area. certainly, in various euro area countries, these measures need to be complemented by efforts to correct past excesses in both the public and private sectors. and these reforms need to be undertaken against the backdrop of a weak and fragile economic recovery, making the whole process more challenging. bis central bankers ’ speeches the first signs of recovery the first signs of recovery are now visible. chart 1 shows the level of systemic risk across the euro area, as gauged by the composite indicator of systemic stress. this index has reached the lowest levels since the euro area sovereign debt crisis started. from the macroeconomic perspective, following a contraction that spanned over six quarters, the euro area ’ s real gdp rose marginally in the second and third quarters of 2013. although projections still see real gdp shrinking marginally in 2013 as a whole, a modest but positive growth rate of around 1 % is expected for 2014. despite these positive developments, the risks around the outlook for the euro area remain tilted to the downside. moreover, unemployment in the euro area remains excessively high, especially in the stressed countries. heterogeneity in the euro area is evident both in terms of economic performance … an underlying characteristic that is observed in the euro area is the uneven performance across countries and the emergence of increased heterogeneity. as can be seen in chart 2, the uneven pace of economic recovery is evident : countries, such as greece, italy and portugal, are registering a contraction in their economies, while germany, austria and malta are among the countries that have recorded modestly positive growth rates. chart 3 shows that unemployment rates vary between less than 5 % in the netherlands, austria and luxembourg to over 25 % in greece and spain. … and in terms of monetary policy transmission even on the monetary side, the transmission of accommodative monetary policy measures across the euro area remains weak and uneven. loans to the private sector have been declining and the pace of contraction has actually accelerated in recent quarters, particularly in the stressed countries. although, on the demand side, subdued loan dynamics in the weaker