The governments of the euro area countries can help the economy to adjust smoothly to the increase in energy prices in several ways. One way is to step up efforts towards structural reform aimed at enhancing the functioning of labour and product markets. This will increase the resilience of the economy to adverse shocks, increase competition and ensure appropriate price-setting by companies.
Governments must avoid the mistakes of the past, when fiscal policies were relaxed in response to the effects stemming from increases in energy prices. At the current juncture, fiscal policies should avoid any procyclical bias and should aim at reaching sustainable fiscal positions in the medium term more quickly. BIS Review 84/2000  2