During the Governing Council meeting held in Malta last October, President Mario Draghi stated that “Monetary policy should not be the only game in town”, indicating that monetary policy could not solve the euro zone’s economic problems alone, and that “…all countries should strive for growth-friendly fiscal policies”. 8  BIS central bankers’ speeches  In the current state of affairs, an efficient budgetary policy must be built around structural reforms, fiscal responsibility and productive public investment. With the Maltese economy operating close to its potential output, it is the appropriate time to create fiscal buffers that could act as a cushion against any future need. Conclusion The single currency has proved to be a challenge to various countries in the euro area. Instead of exploiting the opportunities offered by the single market, some Member States have been impacted by the fixed nominal exchange rate and their inability to correct macroeconomic imbalances through internal adjustment. This made them more vulnerable in times of crisis. One fundamental lesson to be learnt is that, with a fixed exchange rate, it is of utmost importance that the rest of the economy is as flexible as possible to correct imbalances. In this regard, the Maltese economy has been nimble enough to adapt to the new realities of the single currency. Yet, the challenges that lie ahead will require further structural changes that increase flexibility and strengthen economic fundamentals. To this end, Government has identified health and education as new sectors with growth potential that could be transformed into exportable services.
The proper implementation of these programmes, which have been favourably assessed in the European Commission's follow-up of the Lisbon agenda, is vital if the Spanish economy is to leave behind the path of low productivity growth on which it has been moving. Undoubtedly, the high availability of labour is a factor that partly explains the low increases in productivity. But this should not mask the difficulties faced in increasing and modernising productive capital, in properly training labour and in incorporating technological advances, difficulties that must be overcome to improve the competitiveness of the productive system. Market flexibility and efficiency is a vital requirement for sustaining long-term growth in an area of monetary stability. And it is all the more vital if, as in the case of the Spanish economy, the starting point involves a lag in technology and a relatively low level of productivity. This is why it is so important to move forward the Lisbon strategy in our country. The challenge lies, therefore, in translating the programmes designed into effective government action that is capable of mobilising the innovative energy of the private sector and of extending action to other key areas still requiring a liberalising boost, such as the retail trade sector and the land, housing and rentals markets. The financial system During 2005 Spanish deposit institutions operated in a benign domestic and international environment, both from the macroeconomic and financial-market perspective.