Just like consumers and countries, governments cannot live beyond their means forever. Fiscal authorities need to look beyond the current cyclical upturn. There is no alternative to that. Let me remind you of an often forgotten remark by John Maynard Keynes from 1937, in the aftermath of the Great Depression, when he said: “Just as it was advisable for the government to incur debt during the slump, so for the same reasons it is now advisable that they should incline to the opposite policy”. 1 Fiscal consolidation and growth are not mutually exclusive. I disagree with the view that reducing public expenditures will hinder economic growth. On the contrary, prudent fiscal management provides the basis for balanced and sustainable growth. Stability-orientated fiscal policies will foster confidence among households, entrepreneurs and investors, which will ultimately increase our welfare by creating new jobs. 2. How should we address European modalities of today’s global challenges? I have outlined three key areas for efforts to shape the contours of the post-crisis world – reform of the institutions of global governance, reform of the financial system and reform of public finances. These are global challenges affecting in particular the industrial economies. I would now like to explain how Europe specifically is responding to these challenges. An ambitious agenda lies before the continent. It is not only a visionary agenda: it has to be pursued with determination right now.
We have a great deal of work to do on these three issues in the months ahead, and I am confident that when bold reforms in these areas are undertaken, we will have achieved the necessary quantum leap in euro area governance. Thank you for your attention. 6  BIS Review 97/2010