But it is also clear that, as monetary policy works on the demand side of the economy, other policies can assist in this process – or at least not counteract it. This means that the aggregate fiscal stance of the euro area has to be consistent with our position in the cycle.
And it means that this fiscal stance must be achieved in a confidenceenhancing way – that is, consistent with the fiscal governance framework – otherwise lack of confidence will undermine investment and offset the positive effects of fiscal policy on demand.