The level of structural unemployment depends on the flexibility and efficiency of labour and product markets, not on the stance of monetary policy. National governments bear the main responsibility for structural economic reform designed to enhance market flexibility and improve the allocation of resources. Wage moderation can also have a significant beneficial impact.
The ECB will continue to cajole governments into implementing 1  BIS Review 112/1999  necessary structural reforms, but the final hard decisions – and I recognise that they are hard decisions, since the considerable benefits of structural reform only become apparent with time – lie with the national authorities. The success of past structural reform is, however, already visible in the European Union.