By improving the quality of relative price signals, our price stability-orientated monetary policy makes it easier for policy makers and European citizens to identify the areas in which structural reforms are most needed. Beyond safeguarding price stability,  3  Today, the services sector accounts for 70% of GDP, 68% of employment and 96% of the new jobs created, but only 20% of intra-EU trade. This discrepancy reflects not only the fact that services often have an intrinsically local character, but also the many barriers and obstacles still hindering the free movement of services within the European Union. 4  See P. Hartmann, F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation in productivity and growth in Europe”, ECB Occasional Paper Series, September, as well as ECB (2007) “Financial integration in Europe”, Frankfurt a.M: ECB. BIS Review 31/2008  3  there is nothing monetary policy can do to foster the growth and employment potential of our economies. The only modest contribution a central bank can make to structural reforms is to assess their impact, and communicate in a balanced manner and through different channels and fora its views on the expected effects of reforms to the public, thereby helping to build a constituency supporting reform packages. •  As to fiscal policy, let me first stress that I have doubts on the possibility to make a deficit limit contingent on the implementation of structural reforms by national governments.
•  More specifically: o  structural policies in the Member States are supposed to seek to create flexible and efficient structures in product and labour markets with a view to fostering the growth potential of euro area economies and improving the adjustment mechanisms in EMU;  o  fiscal policies are supposed to ensure the sustainability of public finances, effectively limiting government deficit and debt ratios, thereby also ensuring that automatic fiscal stabilisers work effectively as an adjustment mechanism in the currency union; and  BIS Review 31/2008  1  o  wage policies should be compatible with trend developments in productivity in order to foster full employment and should take into account the overriding importance of wage flexibility as an equilibrating adjustment mechanism in the EMU. •  Within the Lisbon strategy, as refocused and reaffirmed by the European Council in 2005, Member States aim to gear national policies towards micro-economic flexibility and macro-economic stability. This would strengthen the capability of the euro area economy to swiftly re-allocate economic resources in view of exogenous economic shocks and improve its long-term growth prospects. The Lisbon Strategy and the peer surveillance of its implementation at the national level have raised the awareness among governments in European countries that structural reforms are decisive for remaining competitive in an increasingly global economic environment and to fully realising the economic potential of the EMU.