The recent events pose, again and more powerfully, the old problem of European economic governance. A strengthening of the Stability and Growth Pact is urgent. The commitment to achieve a structural budgetary position in balance or in surplus must be made cogent by introducing sanctions, including political sanctions, for non-compliance; the accuracy of statistical information, particularly public finance statistics, must be ensured.
We have been reminded that with low global inflation, and hence low neutral interest rates, our new monetary policy tools will become increasingly mainstream. We have also been reminded that fiscal and monetary policy coordination remains critical to economic wellbeing. In New Zealand our institutional relationships are strong, providing complementarity of fiscal and monetary actions.