to them the fact that reforms also allow for diversity. for example, it is not enough to merely say publicly that a country ’ s labour market must become more flexible. otherwise, people take this as meaning that it should become easier to fire people. that is wrong. in germany, for example, after the dramatic contraction in demand as a result of the 2008 crisis, firms did not get rid of workers. unions accepted wage reductions or shorter working hours and that prevented a worse decline. thus, despite apparent rigidities, the labour market responded in a very flexible way. also, countries can be wealthy and stable without all having to implement the same policies. the united states and sweden are two good examples : labour markets are very different there, but people in these countries still have a good standard of living. standard : what you ’ re saying sounds good in theory. but within the troika, the ecb has always demanded of portugal and greece that they weaken protection against layoffs and soften collective wage agreements. there hasn ’ t really been that much room for manoeuvre. praet : our job in the troika is to support the eu commission in its work. that is technical work and, at the end of the day, it ’ s the eurogroup that makes the political decision as to which direction should be followed, since it represents the elected governments and therefore european taxpayers. it must also be clear that not every political solution is bis central bankers ’ speeches feasible, as social systems must remain fundable. still, i hope that, in the future, there will be a greater focus on giving countries more ownership of their reform programmes ; they should act on their own initiative and take responsibility. standard : but is it possible to really change a country, when it ’ s trying to make savings? praet : as the crisis took effect, investors ’ trust in the sustainability of several countries ’ debt was eroded. the ensuing adjustment of public finances was therefore implemented looking mainly at the short - term effects. frequently, public investments were cut and value - added taxes were raised in order to obtain quick debt reduction, even if this weighed on growth prospects. at the same time, however, certain countries have reformed successfully ‒ their labour markets have become more flexible and banks have been restructured. that wasn ’ t easy and it was also painful, but they are growing again. standard : but even your colleagues are saying that a radical course of austerity isn ’

those results to inform their capital distribution plans, and we will continue to use the supervisory process to reinforce this 3 / 6 bis central bankers'speeches expectation. the comments also highlighted an issue with how the capital buffers operate today, which is amplified by the inherent volatility of the scb. as i noted earlier, a firm operating in its capital buffer is required to reduce its capital distributions so that it can build capital over time. by design, the buffer was intended to apply increasingly stringent limitations as the firm's capital ratios decline. but, in our current world in which a healthy and profitable banking system is seeking to maintain its capital levels rather than continue to increase them, a bank will appropriately and safely tend to distribute much or all of its income in any given year. in that case, the operation of the buffer would not result in a proportional restriction of income as the firm's capital eases, but could be a sudden cessation of all dividends if the firm dips into the buffer by even a small amount, even if the changes in its capital levels are quite minor. we are considering adjustments that would make the rules more consistent with the graduated intent. we plan to work with the other banking agencies to consider how best to effect this change. there are two additional elements of the scb proposal that i believe would benefit from modification. first, the scb proposal would have included four quarters of dividends in a firm's scb, in recognition of the fact that firms experience market pressure to hold dividends constant, even under stress. in my view, there may be ways of encouraging greater reliance on less sticky repurchases while providing more flexibility in the regime, and we are exploring alternatives. last, the scb proposal would have included a post - stress leverage requirement. as the federal reserve has long maintained, leverage requirements are intended to serve as a backstop to the risk - based capital requirements. by definition, they are not intended to be risk - sensitive. thus, i am concerned that explicitly assigning a leverage buffer requirement to a firm on the basis of risk - sensitive post - stress estimates runs afoul of the intellectual underpinnings of the leverage ratio, and i would advocate removing this element of the stress capital buffer regime. of course, leverage ratios, including the enhanced supplementary leverage requirements, would remain a critical part of our regulatory capital regime, and we will maintain the supervisory expectation that firms have sufficient capital to meet