But also other countries (like Norway) with no particular difficulties in terms of anchoring inflation expectations have moved in this direction, presumably because their central banks were convinced of the benefits per se of the strategy. At present some twenty central banks have adopted an inflation targeting framework 4 , and some observers would add a few more to that number. The monetary policy strategy of the Eurosystem The Eurosystem has not followed the same route. In October 1998, the Governing Council of the ECB dismissed the adoption of either inflation or monetary targeting and decided instead to select a strategy of its own, which aims at maintaining price stability over the mediumterm. The idea was to develop a credible and flexible, tailor-made strategy that would allow for timely responses to a changing environment, while keeping in clear focus the objective of price stability. And it was necessary to take account of two key factors of that time: the regime shift implied by Economic and Monetary Union (EMU) and the heightened uncertainty that surrounded the introduction of the single currency. Whilst it was important to build on  1  See Kydland F. E. and Prescott E. C. (1977), "Rules Rather Than Discretion: The Inconsistency of Optimal Plans", Journal of Political Economy, 85, 473-92 and Barro R. J. and Gordon R. (1983), "A Positive Theory of Monetary Policy in a Natural Rate Model", Journal of Political Economy, 91, 589-610.
Evidently, though, the possibilities of further using these types of policies have become notably constrained, both at home and abroad. It should also be borne in mind that, once the economic and financial fragility beleaguering the world economy has been resolved, demand-side policies should adopt a more neutral stance. All these considerations on the diagnosis of the Spanish economy in the current international crisis and on the limited leeway available to demand-side policies mean, rather, that  6  BIS Review 79/2009  economic policy has a central role to play in implementing the reforms that help improve productivity and the behaviour of the factor and product markets. It is in this area that the authorities undoubtedly have effective room for manoeuvre, and also considerable responsibility. Let me begin with the labour market, which is where the most pressing problems are to be found. The scale of job destruction has once more highlighted the existence of distortions that emerge with force in recessions and compound contractionary trends. And there is a risk that, as in the past, the surge and change in level in unemployment may stick and that this will delay subsequent recovery. Labour market dysfunctions are also closely linked to the discouraging behaviour of the economy in respect of gains in economic efficiency and in productivity, hampering the possibility of attaining genuine improvements in competitiveness and of raising growth potential.