only way ahead is by means of a coherent macroeconomic policy mix and resolute structural reforms aimed to boost the economy ’ s growth potential, while making it more resilient. this approach should never leave room for pro - cyclical policies. as we have clarified that the consistency and the sustainability of real convergence are extremely important, now it is time to discuss how monetary policy can support these two dimensions of the convergence process. it is beyond any doubt that countercyclical monetary policy favours smooth convergence. this has always been one of the guiding principles for calibrating the stance of nbr ’ s monetary policy, as well as for developing and employing our policy tools. an example of the latter are the unorthodox prudential measures taken before the global crisis to mitigate the impact of extremely volatile capital flows ; with these in mind, the imf mentioned the nbr as being among “ the pioneers ” of what was later referred to as “ macroprudential instruments ”. besides acting in a countercyclical manner, in order to preserve the consistency and the sustainability of real convergence, monetary policy should also be flexible while avoiding extremes. on one hand, it should by no means ignore the threat of inflation for the sake of fast and easily gained ( and therefore illusory ) prosperity. on the other hand, it should avoid becoming, in mervyn king ’ s words, an “ inflation nutter ”. with this philosophy, back in 2005, the national bank of romania decided to adopt a “ light ” version of inflation targeting, as monetary targeting had to be abandoned mainly due to the broken relationship between monetary aggregates and inflation. light inflation targeting was deemed more suitable than any other monetary policy regimes for sustainably achieving price stability, while limiting the cost of excessive volatility in output and employment. a peg was not a feasible option, since exchange rate flexibility was seen as an asset for an economy as big and rigid as romania was at the time, especially given the widening external imbalance and the upcoming stages of capital flows liberalisation. we focused our monetary policy strategy on the medium - term achievement of the inflation objective rather than on hitting the target as fast as possible at any costs. this strategy has been supported by a managed floating exchange rate, which proved to be a highly effective alternative to free floating in cushioning the economy from the impact of sizeable capital flows. as a matter of fact, after the crisis, forex interventions re -

should also contribute to boosting confidence in the financial system in the short run, thus promoting economic recovery. fiscal policy last, and definitely not least, it is also essential for sustainable growth and prosperity that confidence in the long - term soundness of public finances is maintained. government deficits and public debts are rising substantially in most countries as a result of the economic downturn, discretionary measures to stimulate the economy, and the funding of the bank support schemes. this is partly inevitable – due to the downturn – and partly necessary – to help stabilise the economy and the financial system – in the short run. but it is also imperative that fiscal policies are designed and implemented in a manner that strikes the right balance between the need to support the economy ’ s recovery and the need to preserve the confidence in the soundness and sustainability of public finances which is key for the long - term performance of the economy. iii. conclusion i have used the word “ confidence ” several times. the severity and duration of the current economic and financial crisis is partly a consequence of the reduced confidence in the prospects of the economy and the soundness of the financial system. the recovery of the economy also hinges on the restoration of consumer and business confidence that can contribute to the revival of spending and investment, and the return to normality in financial markets and the banking system. the rebuilding of trust will depend on our ability to appropriately combine the policy actions needed to address the immediate challenges with the necessary reforms for establishing an economic, financial and institutional environment that is conducive to sustainable long - term growth. thank you very much for your attention.