. what we aim to capture by trend growth is the rate of growth, which is sustainable in the medium term, which, according to our analysis, has been estimated as falling in the range of 2 - 2½ %. let me also emphasise the fact that estimates of potential output ( and thus of the output gap ) are surrounded by considerable uncertainty. therefore, these indicators should be treated with great caution. we are currently observing a strong cyclical expansion supported by strong productivity growth. however, we need more compelling evidence before it can be concluded that this upturn will be followed by higher growth potential, which is above trend growth, as it has been estimated so far. it is too early to tell, but we are monitoring and analysing developments closely. we will take our findings into account when reviewing the reference value and taking monetary policy decisions. nevertheless, i should like to stress that it is hard to imagine that the current growth in m3 could be justified by an upward revision of potential growth. i should also like to point out that the analysis of monetary and credit developments conducted under the first pillar of our strategy is more complex than simply comparing actual m3 growth with the reference value. the challenge to turn the current expansion into a prolonged period of non - inflationary growth clearly requires further efforts in all policy areas. reforms in the labour market will be a major factor contributing to sustained non - inflationary growth in the euro area. the current level of unemployment in the euro area, despite some decline, is still too high. in this respect, both appropriate wage settlements and structural reforms will be important contributions to continued employment growth and to maintaining low inflation. with a view to fiscal policies in the euro area, it is important that the opportunity of the current economic environment is seized to improve the soundness of public finances. member states should take advantage of the current cyclical position in order to achieve and maintain budgetary positions, which meet the requirements of the stability and growth pact. more ambitious fiscal positions than those targeted in member states ’ updated stability programmes should be achieved, particularly in countries with high debt ratios and especially if economic growth develops more favourably than expected. in addition, we welcome initiatives to implement tax cuts in a number of countries, provided that these measures are consistent with the progress to be achieved in the area of fiscal consolidation. at the same time, more emphasis should be placed on structural reforms on the expenditure side of budgets leading to stricter expenditure restraint. at the current juncture,

. the ecb supports the swift action taken by national macroprudential authorities, which released or reduced capital buffer requirements. in parallel, fiscal actions, the first line of defence at this point, provide essential support to the non - financial sector. these actions include tax breaks, public investment and generous fiscal backstops, such as public guarantees and credit lines. while national support schemes are very welcome, the differences in their size and design could distort competition, as they have not been sufficiently coordinated at european level. loan guarantees also strengthen the nexus between banks and non - financial corporations on the one side, and their sovereigns on the other. as we move forwards, a european approach is important to ensure a level playing field and avoid fragmentation and the re - emergence of the banksovereign doom loop. overall, the euro area financial system has weathered much of the recent turmoil. but the loss of economic output and higher debt burdens increase the medium - term risk to financial stability in the euro area. key vulnerabilities remain, in both the banking sector and the non - banking sector. it will therefore be crucial to ensure that banks remain as robust as possible. the crisis should be seen as an opportunity to develop a vision for addressing pre - existing weaknesses in the banking sector and the crisis management framework for banks. at the same time, the deteriorating profitability outlook for insurers, liquidity risk in investment funds and higher risk exposures of non - banks raise the risk of renewed strains on the financial system. these risks may warrant sector - specific policy action. further reflections are also needed to develop an adequate macroprudential toolkit for this important and growing part of the financial system. the road to recovery allow me to conclude with a few words on the road ahead, namely on the policy action that will be needed during the recovery. ecb monetary policy will continue to provide the necessary support so that liquidity gets through to the people of europe and the real economy. but our response will be made more powerful if all policies reinforce each other. it is thus vital that the fiscal response to this crisis is sufficiently forceful, in all parts of the euro area. people and companies should be able to contribute to europe ’ s recovery wherever they are located. there now needs to be a political agreement to build the appropriate instruments for this 3 / 4 bis central bankers'speeches common response, and i look forward to the upcoming discussions on the basis of the european commission ’ s