Putting fiscal positions back on to a sound track and sticking to the fiscal rules of the Stability and Growth Pact will help to restore confidence. The credibility of consolidation measures is crucial. Fiscal adjustment should be seen to lead to a permanent increase in future disposable income. Moreover, if appropriately designed, consolidation can raise output and employment in the medium term. 3.
The ECB has done an excellent job in a difficult environment, especially when one considers that it started its activities in uncharted territory. In the more heterogeneous euro area of the future, the ECB’s task of providing stable money will become even harder. 4. The integration and adjustment fatigue which followed the introduction of the euro has to be overcome.