and more drastic, given that the sovereign has lost access to financial markets. so the programme is actually helping support the greek people ’ s standard of living. the same is true of the reforms to improve competitiveness. greece ’ s competitiveness gap vis - a - vis its main trading partners is still at least 15 %. the programme aims at closing this gap through reforms to enhance the downward flexibility of prices – in the labour market and in product and services markets. implementing these reforms would create the basis for more export - oriented growth and job creation. without them, the economy would adjust primarily through lower production and employment, with disastrous effects for social cohesion bis central bankers ’ speeches moreover, many of the reforms in the programme have been demanded for years by the greek people themselves. there is a silent majority that wants to see a well - functioning public administration that serves citizens, enforces tax compliance, and creates the conditions for private sector growth. and had the public administration reform proceeded as programmed, it would have offset some of the contractionary effects of fiscal consolidation, as has happened in other programme countries. avoiding illusory alternatives people, and especially politicians, do not like the notion that there are no alternatives. true enough, there always are alternatives. but they may not be realistic or acceptable ones. some commentators would like us to believe that exit and devaluation could solve greece ’ s problems. i do not wish to go into details of such assessments. let me only say that much of what is published represents dangerously short - sighted and partial analysis. we must also be realistic about the prospects for a so - called “ marshall plan for greece ”. i fully support a re - direction of eu funds to maximise growth and competitiveness. but it takes time to programme and absorb these funds. greece has so far absorbed only around 35 % of the cohesion funds available for 2007 – 2013 period, a level that in fact exceeds the eu average already. so any measures we take today will not be felt in the short run. what about relaxing the fiscal targets to support growth in the short run? again, we need a full analysis of what this implies. delaying adjustment is risky : it would increase the debt - togdp ratio in 2020 above the 120 % targeted under debt exchange. this is the upper bound of what could still be considered sustainable. and it is also not free : it requires additional funding from the creditor countries, because the country still runs a primary deficit. in

by hiding behind overly optimistic forecasts or unrealistic stress tests. but this is ultimately a self - defeating strategy. the problems do not go away. instead, the market loses trust in official statements. governments then have to take ever more drastic policy measures to win back credibility. overall, the constant stream of missed targets and data revisions saps at euro area confidence. for those countries receiving financial assistance, confidence can be restored by rigorously implementing their programmes. for ireland and portugal, this means maintaining their strong track record of implementation. for spain, it means a convincing recapitalisation plan that removes all doubts about the solvency of its banks. the first financial review can provide a basis for this. for cyprus, it means finally addressing its macroeconomic and financial sector vulnerabilities. for other member states – including france and germany – it means learning the lessons of the crisis so far and getting ahead of the curve on fiscal and structural reforms. measures at the european level but as i said in my introduction, a strategy to restore confidence must strike the right balance between national and european responsibilities, and there are also important steps to be taken at the european level. the most pressing is addressing the institutional design of emu. the euro area needs to send a clear message that it has understood its design flaws and has a plan to correct them. this would signal to markets that the euro area is a place they can invest. and it would underscore member states ’ commitment to the euro and remove any doubts about its integrity. this alone would provide a major boost to confidence. the report by the four presidents in principle endorsed by the european council last week, sets out the four core building blocks of a genuine emu. while it is a vision for the future, each of these building blocks is designed to address the issues that are currently eroding confidence in the euro area. for instance, the financial market union would help break the link between banks and their sovereigns and stop deposit flight. the fiscal union would prevent countries from running up excessive debt levels. sound governance and enforceable rules can lay a path towards common debt issuance, although here the sequencing is key. the economic union would ensure that countries can adjust properly without an exchange rate. and the political union would strengthen the democratic legitimacy of emu. a commitment to reinforcing emu in this way, coupled with the measures for greece and other countries that i have described above, is the only way out of the