Reforms in product and labour markets would help to reduce price and quantity distortions and thus encourage better allocation of resources, improving the efficiency of investment decisions as well as increasing productivity and real GDP growth. Let me be somewhat more specific about the areas in labour and product markets where I think that further progress is most urgently needed.
Nevertheless, it is clear that this was one of the most expensive financial crises in history when measured relative to GDP. The collapse of Government tax collections and the development of a massive public sector deficit led to concerns in capital markets about the sovereign’s ability to service the debt.