Indeed, many European countries are currently at a crossroad, faced with the option of either profoundly reforming their social security systems or putting their sustainability at risk. In this context, let me stress that structural reforms lead to lower deficits. Sound fiscal policies imply a strong emphasis on structural expenditure reform.
Public expenditure needs to be diverted away from improductive areas and poorly managed transfer systems, towards uses that enhance productivity and the accumulation of physical and human capital. There is a close relationship between structural  2  BIS Review 7/2004  reforms and sound fiscal policies. Together, they enhance confidence and improve the economic situation on a lasting basis.