slippage and, where appropriate, to react in time so as to prevent such slippage from adversely impacting budget deficit targets. bis central bankers ’ speeches the public debt / gdp ratio will continue on an upward trend, until reaching 100. 3 % according to the official forecast. the scale of this figure highlights the challenge facing budgetary policy in spain, which will have to continue prioritising the gradual reduction of this debt. outlook and challenges the outlook for the spanish economy is brighter than that which i outlined to this committee a year back. the rebalancing of domestic expenditure and net external demand has continued, with greater vigour than was previously expected. the pick - up in employment is proving to be one of the main drivers of domestic demand, attesting to the role that the labour market reform and wage restraint are playing in entrenching the recovery, although unemployment remains unacceptably high. but this scenario of recovery is not free from risks. some, particularly those stemming from the external environment, have increased in recent months. others are related to the effects of the crisis on the real and financial position of households and firms in a setting in which private - sector deleveraging and fiscal consolidation must continue. the start - up of the ssm, the assessment of significant institutions and the new european resolution authority. as earlier stated, i feel bound to refer to the imminent start - up of the single supervisory mechanism. further progress has been made in recent months on the project to create a banking union. as we know, this project is vital to ridding europe of the financial fragmentation which, at the height of the crisis, jeopardised the very survival of the euro and which has affected economies such as spain so adversely. i shall broach three issues : the single supervisory mechanism ; the assessment of the solvency and soundness of the european banks directly supervised by the ecb ; and, thirdly, the single resolution mechanism. 1 ) the first pillar of the banking union is the single supervisory mechanism, whose aim is to improve supervision in the euro area and make it more uniform, to promote financial integration and to break the negative link between confidence in banks and doubts over the sustainability of public finances. since the approval by the european council of the ssm regulation, in october 2013, work has proceeded apace to ensure the ssm commences operating on 4 november. in particular, the ecb has approved a framework regulation which defines the

this explains why the eurosystem has no exchange rate target. however, the development of the external value of the euro is taken into account in the eurosystem ’ s monetary policy strategy, which is based on two pillars. the first pillar consists in the analysis of the monetary developments, with an announced reference value for the growth of m3. the second pillar comprises the analysis of other economic and financial indicators which may signal inflationary risks, and the exchange rate is precisely one of these indicators. in particular, in so far as the strengthening of the usd against the euro has contributed to the recent acceleration of inflation in the euro area, it is certainly a reason for concern which has to be addressed adequately. looking at the main underlying causes, the high rate of domestically based real growth in the united states seems to have been one of the main underlying factors of that strength. however, it is also important to bear in mind the historic dimension of the euro area as a common european project, and the adequate approach to evaluating the exchange rate of the euro against the usd is certainly a long - term one. … how can we turn the current expansion in the euro area into a prolonged period of non - inflationary growth? there is no doubt that this is a challenge for both society as a whole and policymakers. what it takes is people who are prepared to act as entrepreneurs and are willing to take risks. what it takes are policymakers who set incentives and push for continuous economic reform and adjustment. existing regulations have to be checked continuously in terms of their adequacy, and adaptations have to be introduced as timely as possible, while paying due attention to social needs. in particular, it is important that the current economic expansion should be used to enhance the fiscal consolidation. … how does this experience translate to countries in transition? what is the relevance of this experience for them? obviously, there is a consistent need of economic reform in all societies. while those reforms which can be characterized as transition - specific will sooner or later come to an end, “ completing transition ” - the theme of this conference - should not be mistaken as “ completing reforms ”, as reforms will never be complete and the need for further adjustments will always arise again. constant reform efforts are the key to achieve a path of sustainable high real growth. maintaining a faster pace of average real growth than in the european union is a minimum condition for keeping the catching - up process going in the transition economies. we all need and benefit from this