The activation of the macroprudential tools in order to create a buffer to be used in bad times incorporates a new dimension into the interactions with monetary policy. That is an issue which, in my view, should be analysed further. At a minimum, in these cases, monetary policy and macroprudential policy should take into account their respective decisions when calibrating the use of their instruments. As for fiscal policy, it is also important to emphasise that the creation of shockabsorption capacity through macroprudential decisions should not be used as an argument for relaxing fiscal policy. In other words, fiscal policy should also 7/11  create buffers in good times to be used in bad times, through automatic stabilisers or discretionary action, in particular in countries belonging to a monetary union. Another key issue related to this discussion is that the capital buffer built up in good times is expected to be released when the phase of the cycle changes. Significantly, this decision can be even more complex than those made in the activation phase. In this respect, and given the empirical evidence we have, there is a clear issue of timing. If it is released too early, it may even accentuate the expansion of the financial cycle. If it is released too late, it may entail a significant cost to the real economy. It is also necessary to assess whether the release has to be once-and-for-all or gradual. The release of the buffers may induce negative market reactions or generate conflicts with the microprudential supervisor.
At the same time, the scope for budget policy will be curtailed in a sense by the Stability and Growth Pact, though this need not be so much of a restriction in practice as long as the objective of medium-term balance or surplus is met. A stronger challenge is to be expected from the ongoing integration in the European Union, which BIS Review 50/1998  -5-  EMU may accentuate. This process can be rather rapid, not least in financial markets. In markets for goods, pricing in a single currency may accelerate the existing trend towards smaller differences in consumption taxes, for example. Structural and labour-market policy Finally some words about structural and labour-market policy. This policy field is much less clearly defined than the two I have already considered. It is affected by many different rule systems at both national and EU levels, besides belonging to the competence of many different ministers and commissioners. The common agricultural policy and tax harmonisation are two examples. The components of structural policy that concern the internal market - competition laws, the whole of the market for goods and services, the mobility of capital, and labour market mobility - are largely regulated at EU level. The competition laws are one example here. Another component of structural policy is the regulations and other matters that apply to the labour market. Many initiatives here have recently been taken at EU level in order to speed things up and comply with political requirements in the Union.