period of stagnation in the early 2000s ”. the lower growth reflects lower employment with lower productivity growth. this holds true for europe, too. a lot of research tells that rigidities in product and labour markets go hand in hand with lower productivity and employment. even though changes have taken place, pockets of high regulation still remain especially in the service sector. oecd indicators tell that further liberalisation of product markets would allow many countries to raise their employment rates. liberalising entry into regulated sectors can be an important source of investment and job creation. product market liberalisation is a way to enhance growth. the reforms in labour market are also very important. when economies with imbalances recover from downturn there is a major need to reallocate resources for example from real estate and construction sector to new areas. demography also calls for labour market reforms. in the coming years in many countries a greater number of people will retire than enter the labour market. we need reforms to increase the labour supply. how is public sector consolidation progressing? many advanced countries have raised their public debt to high post - war levels. high debt levels make countries vulnerable, put a drag on growth and limit their room for countercyclical policies. this we do know. we have discusses and monitored the public debt closely last years. bis is an international organisation with high reputation. how did they see the debt development? according to bis : “ the largest adjustment has taken place in economies facing financial market pressures, greece is expected to improve its underlying primary balance by almost 17 percentage points of potential gdp by the end of 2013, while ireland and portugal are expected to have improved theirs by 7. 3 and 6. 8 points respectively ”. for spain the figure is 8. 3 and italy 5. 1. these are not small figures, we must admit. still, the work must continue. all countries need a healthy primary surplus to take care of their borrowing costs. often the most critical question is how they succeed in curbing the expenditure related to pensions and health care. on banking i spoke about the banking union. banks have a vital role in providing finance to households and firms. this holds true especially in europe where the share of the banks in the financing of companies has traditionally been large compared to capital market financing. it holds especially true in the case of financing of sme ’ s. so, it is important that the regulatory reform as a whole supports and strengthens the banks´ ability to provide socially vital financial

policy let me begin with the new kid on the block – fiscal policy. since the global financial crisis, across the advanced economies, monetary policy used to be the only game in town as governments struggled to restore debt sustainability. fiscal policy is now, for the first time since 2009, turning more expansionary. 2 / 7 bis central bankers'speeches according to the bis, estimated cyclically adjusted primary balances in the advanced economies turned slightly negative in 2016. this is likely to continue in the years ahead. what is behind this shift in the balance of the policy mix? first, policymakers are increasingly recognising the limits to unconventional monetary policies and the associated financial stability risks. second, public dissatisfaction with the economic status quo is forcing governments to reconsider fiscal policy, especially public spending and tax reforms that can potentially boost the economy ’ s productive capacity. it is in the us that the nascent rise of fiscal policy has attracted most interest. historically, a clean sweep of congress and the white house has led to expansionary fiscal policy. but the size of the fiscal stimulus will depend on the balance that will be struck between the ambitious spending plans of the white house and concerns about debt sustainability among house republicans. there is considerable uncertainty over not just the size of the fiscal package but its composition. there appears to be broad consensus on reducing corporate and personal income taxes, broadening the tax base, and offering a one - time tax holiday on repatriated overseas corporate profits. but there is no clarity on the details and hence the size of the fiscal impact. on plans to increase defence and infrastructure spending, there is currently less consensus. it is also not clear how these spending increases will be financed. besides uncertainty over the size of the fiscal stimulus, there is also uncertainty over the impact of a given stimulus on growth. this impact will depend on how much slack there is in the economy. signs are that the us economy is close to full employment. unemployment is at or near the natural rate and wages are increasingly healthy. if the economy is close to its underlying potential, a fiscal stimulus will end up mostly in inflation rather than growth. this brings us to the next broad theme of 2017 : the return of inflation and the tightening of financial conditions globally. the normalisation of us monetary policy global inflation, which was weighed down by the fall oil prices during the past two years, has started to gradually pick up again. energy prices have rebounded off their lows and commodity prices appear to have