15  Jefferson was elected president in 1800, but did not appoint Gallatin until 1801 – even though it had been his intention from the start. See for example Wright and Cowen, op.cit., p. 93, for details. BIS Review 106/2008  3  priorities included a change in Hamilton’s tax structure in order to better reflect the Republican Party’s ideology and its constituencies. He also focused on the need to increase transparency in fiscal policy. He progressed rapidly on both fronts. Internal taxes were soon abolished. The federal government came to rely almost exclusively on import tariffs, which Gallatin saw as luxury taxes that did not burden his farming constituency. 16 Gallatin also convinced Congress to pass the law of 1801, which required an annual report by the Secretary of the Treasury to the President. He submitted the first of these reports later that year. Moreover, the minting of dollars was somewhat scaled back under Gallatin. To compensate, he allowed foreign coins to circulate along with the dollar. These measures were not taken because Gallatin was opposed to the Mint. Rather, the Mint proved to be very costly for the federal purse. Therefore, Gallatin saw the reduction of its operations as a way for the government to save money, in line with his primary objective of fiscal consolidation.
For instance, in order to bring the debt-to-GDP ratio back to 60% in 20 years while maintaining a primary deficit in line with the historical evidence, real growth in the euro area would have to be twice its historical value (1.3% on average over 1995-2021), or alternatively the implicit rate on government debt would have to be half the current one (see right-hand side figures in slide 5). Although simplistic, these exercises illustrate the significant 4  effort needed for the transition to the medium-term fiscal targets, and, indirectly, how it would limit fiscal policy’s capacity as a stabiliser for the duration of the adjustment process. These are just some of the arguments behind the broad consensus on the need to reform the fiscal governance framework in the European Union. However, while everyone appears to agree that reform is needed, views differ on the necessary steps forward and their sequencing. I personally believe we need a coordinated effort aimed at reinforcing the euro area and making it more resilient to shocks. And, in my view, this would involve reforming several areas of economic governance: fiscal and structural policies, the banking sector and capital markets. Allow me to offer a number of reflections on the desirable elements of such a reform, with a view to improving the operation of the policy mix in the euro area.