1  See ECB, “Progress with structural reforms across the euro area and their possible impacts”, Economic Bulletin, Issue 2 / 2015. BIS central bankers’ speeches  1  However, since 2013, very low financing costs for sovereigns and rising share prices have eased the pressure to implement more difficult policies 2. By definition, for structural policies to be most effective, a long-term commitment, continuous implementation and strong reform ownership are needed. This is the only way to permanently change expectations and growth prospects. This leads me to our second, more concrete, question: Which structural reforms are still needed to support stronger and sustainable growth? To start with, let me stress that all euro area countries, albeit to different degrees, still need to implement structural reforms. There are a number of credible reforms that are able to increase permanently total factor productivity; to affect confidence; and to help reduce uncertainty and increase investment and sustainable demand. In particular, for the euro area I see the need to forcefully work on: 1.  reducing red tape – by easing licensing procedures and facilitating access to credit by viable firms;  2.  improving the judicial systems – including the effectiveness of insolvency regimes;  3.  increasing the efficiency of the public administration and tax systems;  4.  reducing entry barriers in sectors sheltered from competition; and  5.  reducing hiring costs and skill mismatch. These reforms would unlock immediately “hidden” demand, increase economic resilience and facilitate the working of monetary policy.
The ability of British manufacturing industry to provide strong impetus to private sector growth will be an important offset to the drag to domestic demand from the rebalancing of public finances over the next few years. There is also evidence that strong growth in the global economy is benefiting parts of the services sector. Earlier this week, the airport operator BAA reported a 7.6% annual rise in traffic volumes at Heathrow Airport in September – driven by strong business travel growth to Asia and other emerging markets. From the position a year ago – when demand had fallen sharply at home and abroad in the wake of the financial crisis – this turnaround is impressive. So my verdict on the recovery would be “so far, so good”. But we have to recognise that we are still at an early phase of the upswing. It is not surprising, therefore, that growth is uneven across sectors and from quarter to quarter, and that confidence is still somewhat fragile. The state of confidence is not helped by the negative tone of much of the economic commentary at present – which seems to reflect a high degree of nervousness about the  3  Data is latest available: for manufacturing it relates to the three months to August and for services to the three months to July. BIS Review 134/2010  3  progress of the recovery. But this raises the obvious question: if things are so good, why do they feel so bad – to some people at least?