are asked to at the ballot box. by casting their votes, they make choices that will not only determine their lives, but also those of the generations to come. they deserve to have the full picture of the alternatives they are facing before they do. 2. the potential of the european strategy but citizens still rightly ask : where will growth come from? this leads me to the second theme of my address today. is the euro area condemned to a “ lost decade ” of low growth and high unemployment? or are there new sources of growth we can exploit to get out of this crisis? here, the answer depends on governments themselves. the truth is that they are not out of options when it comes to growth. there are new sources of growth that can be tapped, even while budgets are being cut. but to do so, they have to implement the other pillar of the european strategy. they have to enact deep - rooted economic reforms that increase the potential of their economies to grow. reforms to open markets, increase competition, and remove bureaucracy. reforms to advance innovation, encourage entrepreneurship, and help public administration actually serve the public. these reforms are not easy to implement. they require tough choices, perseverance to confront vested interests, and patience for the effects to become visible. reforms as the path to growth … but their potential is huge. to give a sense of what can be achieved, recent research from the imf1 finds that euro area countries could boost their gdp by more than 3 % over five years by opening markets to competition and reforming tax systems. and they could also do a lot to support growth by removing the remaining barriers to a single market in europe – in particular by completing the single market in services. barkbu, b., rahman, j., valdes, r., “ fostering growth in europe now ”, imf staff discussion note, june 2012 bis central bankers ’ speeches the european commission estimates that implementing the services directive – which covers activities that make up around 40 % of eu gdp – could reap additional gains of 330 billion euro, or more than 2. 5 % of eu gdp, over five to ten years. and this only requires implementing legislation that has already been agreed. … and fairness higher growth is not the only benefit from reforms : they also contribute to a social fairness. as the oecd going for growth 2012 report put it, this is the “ double dividend ” of structural reforms. commentators who criticise the social consequences

are expressed in nominal terms, an environment of stable prices prevents an arbitrary redistribution of income and wealth between borrowers and lenders that could result from unanticipated price developments and lead to financial stress and potential defaults. moreover, monetary policy that credibly preserves price stability promotes financial stability. the benefits of the ecb ’ s credible commitment to maintaining price stability have been demonstrated during the current financial crisis. through the firm anchoring of inflation expectations to price stability, the ecb ’ s monetary policy has minimised the risk of deflation. moreover, stable inflation expectations have enhanced the effectiveness of monetary policy decisions in stabilising the economy, which is particularly relevant when nominal policy rates article 105 ( 5 ) of the treaty and article 3. 3 of the statute of the statute of the european system of central banks and of the european central bank state that “ the escb shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system ”. see http : / / www. ecb. europa. eu / ecb / orga / escb / html / mission _ eurosys. en. html. see ecb financial stability review, june 2009, p. 9. this definition implies that the safeguarding of financial stability requires the identification of the financial system ’ s main sources of risk and vulnerability, such as inefficiencies in the allocation of financial resources and the mispricing or mismanagement of financial risks. other definitions of financial stability that have been proposed also reflect the inherent complexity of the concept. a. crockett ( 1997 ), the theory and practice of financial stability ”, gei newsletter issue no. 6, 11 - 12 july. and r. ferguson ( 2003 ), should financial stability be an explicit central bank objective? fed board, mentions that “ it seems useful … to define financial stability … by defining its opposite : financial instability. “ are very low and face a lower bound. in turn, this has contributed to financial stability, both by helping to stabilise economic activity and by reducing the potential risk of a fisherian - type debt deflation spiral. conversely, a stable financial system enhances the effectiveness of monetary policy in maintaining price stability in various ways, namely by facilitating the smooth transmission of monetary policy impulses, by containing the propagation and impact of macroeconomic economic shocks through the financial sector, and by reducing the