with a significant fall in its unemployment rate. today, french reforms are heading in the right direction, [ slide 5 ] in particular the tax credit for competitiveness and investment ( cice ) and the responsibility and solidarity pact ( rsp ) that enhance the competitive strength of the french economy. a policy of administrative simplification, the so - called ‘ simplification shock ’, and a new law to sustain economic growth and entrepreneurship ( ‘ loi macron ’ ), are also being conducted in order to rebuild business confidence. however, we are not there yet and a number of reforms need to be complemented. in particular, in the labour market : hopefully renewed progress will be made with the draft law under discussion in parliament. finally, in the euro area, fiscal policy is now more balanced since significant adjustment has already been achieved. structural efforts and a growth recovery have led to a reduction in deficits and to a stabilisation in the ratio of debt to gdp. this more balanced policy mix is an opportunity to engage in new ways of thinking and to strengthen the recovery via stronger economic coordination in europe. the room for manoeuvre in economic policy is highly heterogeneous across european countries, and each country should use its capacity to improve the overall situation [ slide 6 ]. european countries have done quite a lot on their own, but now we can and must do more to coordinate demandside policies and structural reforms at the european level. to do so, i would like to make two proposals. 4 / strengthen investment first, we need to improve investment financing [ slide 7 ]. our efforts should be put towards financing growth and innovation and towards finding the right mix between debt and equity financing solutions, while still preserving financial stability and consumer protection. in the eu, the european commission has launched several initiatives to serve these objectives, particularly the investment plan and the capital markets union. bis central bankers ’ speeches second, we need to focus on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. the european fund for strategic investments ( efsi ) drives the investment plan for europe. it supports strategic investments in key areas such as infrastructure, education, research, innovation, as well as risk finance for small businesses. through the use of limited public guarantees, it aims to foster private investments totalling eur 315 billion in three years. for the first year, the plan managed to trigger around eur 76 billion of

’ s approach has been that has been “ too little, too late ”. i would submit that the test of this is yet to come. it is well - known that monetary policy acts with a lag. it could be anywhere between 6 and 12 months, even longer before demand side pressures abate in response to an action. given this, actions taken during january – july 2010 should start to show their impact on inflation over the next 6 to 12 months. the fact that the non - food manufacturing inflation rate went up sharply during the first half of the year is in and of itself cannot be attributed to the absence of monetary actions during this year. to address that, actions would have had to be taken in the second half of 2009. but, at that point even the domestic recovery was at best in its early stages and its trajectory was quite uncertain. an anti - inflation stance in those conditions would have been rather risky. finally, as i have already mentioned, an important lesson from the crisis was the critical role of liquidity in the financial system in maintaining economic stability. the policy approach over the past few months has been very conscious of the need to balance the exit from an abnormally high liquidity situation, which the response to the crisis created with the current liquidity requirements of both the public and private sectors. conclusion to conclude, the management of current inflation requires both supply - side and demand - side approaches. monetary policy has addressed the latter with a gradual, calibrated set of actions on both interest rates and liquidity management. the pace and sequencing of the actions has been influenced by both persistent global uncertainties and the need to support the domestic recovery. this has required a balancing act between reining in inflationary expectations and adequate liquidity in the domestic financial system. while the current rate of inflation is a legitimate concern, the results of this policy stance should become visible over the next few months.