emerge, reflecting factors such as a more favourable than expected macroeconomic environment, should be exploited to make faster progress with fiscal consolidation. at the same time, in countries where there is still a need to take additional specific measures to achieve consolidation targets, such measures should be adopted swiftly to ensure that consolidation commitments are fulfilled. this is a prerequisite for maintaining confidence in the credibility of governments ’ fiscal targets. positive effects on confidence can compensate for the reduction in demand stemming from fiscal consolidation, when fiscal adjustment strategies are perceived as credible, ambitious and focused on the expenditure side. the conditions for such positive effects are particularly favourable in the current environment of macroeconomic uncertainty. in order to support the process of fiscal consolidation, to underpin the proper functioning of the euro area and to strengthen the prospects for higher sustainable growth, the pursuit of far - reaching structural reforms is essential. major reforms are particularly needed in those countries that have experienced competitiveness losses in the past or that are suffering from high fiscal and external deficits. measures should ensure a wage bargaining process that allows wages to adjust flexibly and appropriately to the unemployment situation and losses in competitiveness. reforms to strengthen productivity growth would further support the adjustment process of these economies. we are now at your disposal for questions.

the same vein, these mechanisms might also potentially amplify feedback effects of negative market developments during a crisis. to contain these destabilising effects, greater importance should be attached in future to adequate and, in particular, counter - cyclical risk buffers. a second challenge arises from the interconnectedness of the financial system. this is obviously a necessary feature of any modern financial system. but this interdependence entails consequences – macroeconomic costs which cannot be accounted for at the microeconomic level. these systemic externalities increase as institutions become larger and more interconnected. the macroprudential perspective therefore provides arguments for treating financial intermediaries differently according to their position in the system as a whole. this functional view also justifies regulating market participants outside the traditional banking system identically insofar as they fulfil similar functions or roles. the appropriate regulation and supervision of big or highly interconnected institutions poses a particular difficulty as their collapse would jeopardise the financial system as a whole ( “ too big or too interconnected to fail ” problem ). a logical corollary of this is the need for a greater intensity of supervision. moreover, additional capital requirements make sound analytical sense. yet it should be noted that the practical implementation of these theoretically advisable ideas involves some difficulties as does, incidentally, formulating anticyclical capital requirements. however, this must not lead to the issue being ignored, as the potential opportunity costs to society would be too grave. it is clear from these brief comments that adding a macroprudential perspective to microprudential oversight poses major challenges for central banks and supervisory authorities. the bundesbank is seeking to face these challenges by devoting particular attention to macroprudential analysis. since may 2009, all work on these issues has been focused within our newly created financial stability department. this department was also mandated to write this year ’ s financial stability review. getting macroprudential supervision right is indeed very much a work in progress. we are in the middle of a period of intense debate. nevertheless, concrete progress has already been achieved in some areas. in this regard, the reform agenda which is being implemented through the g20 summit process, largely under the guidance of the financial stability board ( fsb ), deserves special mention. given significant mutual interdependence as well as substantial cross - border effects, there is good reason to establish rules at the international level. inconsistencies