 So we must indeed start because we are late and we have a very good panel to discuss these more structural perspectives on the unemployment problems in Europe. And we have Patrick Honohan, who is governor of the Central Bank of Ireland. We have Catherine Mann, who now is chief economist at the OECD after many other jobs, which I am not going to describe. We have Christoph Schmitt, who now is the chairman of the German Council of Economic Experts. So a very important job. And we have Jean-Pizanie Ferri, who after being in Brugel and many other places is now general commissioner of France strategy. So it is indeed a very good panel to have this discussion. I'll give the floor first to Patrick, gentlemen and Catherine, ten minutes please in your initial statements. Well, thank you Vitor for inviting me to say a few words in this session. I still don't know why you asked me to do it because it's many years since I talk about structural policies on that and I almost never speak in public about any of these matters now, which is in itself interesting. It was a good idea. Therefore, I just wanted to, reflecting already in advance, but drawing a little bit on our discussion over the last day and a half, I'm not going to lecture on structural reforms. I'm not going to discuss empirical evidence on cross-country growth. I remember doing that stuff a long time ago and financial depth, that was the thing. All you needed was financial depth, was the only thing that would be robust in regression as well. Then some people got too much financial depth, so that wasn't so good. I just thought I would just use the time to deconstruct this huge topic and why we talk about this topic at the moment in three dimensions. First of all, I ask why now? Why are we especially concerned about structural reform now? I think there are about six possible different reasons. Which way you think about it colors the emphasis and focus that you have and I think it's worth thinking about that. The second point I want to ask are there issues of language and communication that we're not thinking hard enough about in talking about these things as policy advisors, central bankers, policy advisors and so forth? Should we pay more attention to that? Then finally, and maybe just drawing on my own experience in Ireland, how should we interpret the Irish recovery from the crisis in employment and growth, which is the topic of this session, by reference to structural reform? If the experience was successful, is there some kind of silver bullet that you might want to, if it was financial depth in the old literature? Is there some silver bullet that you can draw out from Ireland? I'll suggest a silver bullet, but of course it's not a silver bullet, but it's worth thinking about. Why now? I think there are about six different reasons. First of all, there are long-term growth issues, sorts of things that Crispus Reedy was talking about in the last session. There's the question of recovery. Do we need structural reform now in order to accelerate the recovery? Are we talking about structural reforms now to guard against what people have talked about the political hysteresis of taking the wrong kinds of structural measures, steps backwards, because of the crisis, and that could damage the long-term? Is it because we've discovered problems in this crisis that need to be fixed, that we didn't really know about before? Or is it simply because people are looking for fiscal room, or they're looking for fiscal adjustment, and they're pointing to structural reforms as a technique for achieving fiscal adjustment? So long-term, never miss the opportunity of a good crisis. That's part of the story. As somebody said earlier this morning, there's a political logic to it. It may not be the best time, but it may be the only time that you can get reforms. And maybe it's even more necessary now in Europe, given the technological degree to which Europe may have fallen behind on the technological frontier, the convergence of emerging markets, and the impact of that on employment. Well, that's one big area, and I think that's what's inspiring some people to say, now, we have an agenda for structural reform, and now the politicians may do something about it. Second one is, we need to get out of this recession. We're still many, many Euro area countries, well below the peak of output or even employment. Will these structural reforms, or will some structural reforms get us out faster? And we had discussions earlier today about, yeah, some of them might, and some of them might not. And there are some job-destroying reforms, at least destroying in the short run. A lot of the discussion about whether, for example, employment protection legislation or reforms can be associated also with improvements in employment in this kind of conjunctural environment really depend on confidence arguments. And we remember all those arguments about, in the other context of fiscal adjustment, of expansionary fiscal contraction, is there a confidence factor that generates investment growth? I think Mario talked about this in his speech yesterday. The third, and I think quite a different reason for looking at structural reforms now and focusing more upon them now, is are we realizing the cost of shocks and therefore the need to build resilience through structural reforms? And I think Tito Bueri's paper was very much along those lines, recognizing the contrasting degree to which different European countries have responded to the crisis. And we may get, have some lessons in Ireland from that. I already mentioned then the fourth one, guarding against damaging anti-reform measures. I think it was well brought out by several speakers, and I think Sajid San Paul talked about the political hysteresis, the problem of potentially, how you deal with this whole issue of counter-cyclical unemployment benefit trends. And then the fifth one, is it because we're trying to fix structural problems discovered in the crisis? Not sure that that makes that much sense when you think about the contrasting structural problems in different countries. I mean, the sluggish growth of Italy sort of discovered because of the high debt environment and how that looked like causing destabilization. The fiscal excesses in Greece, the private credit bubble in Ireland, quite different types of problems. But you do hear to some extent in the narrative around structural reforms, look how we got into this crisis. We've got to make structural reforms to get out of it. Not sure it's as coherent as the other ones. And finally, maybe people are adopting and talking about structural reforms because they see it as a double dividend for fiscal correction. We need to adjust the fiscal positions, obviously, at what pace can be discussed. And it's not that the structural reforms are, that it's fiscal adjustment masquerading as structural reforms, but a double dividend. You get your fiscal adjustment and you get a growth benefit in the long run. But I think if we don't think carefully about, when we're talking about structural reforms, about which of these motivations, I think we may choose the wrong packages and we may also not ring true to our audiences as policy advisors. And so that brings me to the question of language. You know, I think we all know in central banking communication is really, really important. And we use a lot of tautological language and vague language when we talk about structural reforms. I mean, reform is good. It's a tautology in itself. And I actually suspect that the language that we tend to use and how we use it can be unnecessarily provocative or counterproductive. It can be, at the same time, euphemistic, so we use nice word like reform, ambiguous, don't be too precise because you might trigger a reaction, and sometimes patronizing. And occasionally, as Paula Grover suggested yesterday, intrusive on politics. So for example, when we talk about labor market flexibility, are we sure we're not just talking about low wages? Well, in this room, we're not. But sometimes, people are talking about labor market flexibility and they're just meaning low wages. Are they seen as meaning low wages? So I think precision in language and elaboration of what exactly we mean. Fiscal reforms. Well, is that a synonym for size of government? Because it will be seen as a synonym for size of government by people who think government should be big. On the other hand, we talk about protections, dismantling protections. Well, protections for whom? Very often, always, protections are selective. They protect some people at the expense of other people. And reforms that are inequality reducing are one thing. But reforms, failure to do reforms that could be inequality reducing. For the sake of maintaining some kind of protection, may actually be inequality increasing. So reform has distribution effects and it's complex. And we should be careful about being precise about how we talk about it. Now finally, in my last minute and 20 seconds. Is Ireland then, the recovery is strong recovery. Certainly, it's an employment dimension. Last two years, employment has grown by 2%, almost just under 2% per annum. Is Ireland a poster boy story for structural reforms? For this employment, there's productivity. And as we mentioned earlier, productivity and employment can be enemies in the short term and friends in the long term, as the way I put it. But I think this came, was discussed this morning in the lump of labor discussion. And has productivity been fantastic in Ireland? I should remind you that there are great traps of interpretation in the national accounts of a super open economy, one of the most globalized economies in the world. Agriculture productivity measurements very, very tend to mislead when you're looking at GDP, trends in unit labor costs. So the recovery actually in Ireland has not been a super productivity story even though it looks like it. And the competitiveness gains have been appreciable, but they're nothing like what you would measure the headline numbers. So you've got to be very careful about interpreting the Irish story as a super productivity and a super competitiveness story. That was the story in the 1990s, even though in the 1990s it was exaggerated as well. The recovery of these elements have been sufficient, but they've not been the big drivers. So what are the big drivers? Well, I think you saw on the slide that John Fernald put up, Ireland almost the best of the countries in terms of having got to a structural reforms, OECD measure by 19, whenever it was, 85, 90, some early date, not made much difference since. So I think it's true to say that Ireland has done a lot of the things that we all in the room want countries to do, and it had done them in advance and it was able therefore to respond to the emerging situation in a way that was quicker and achieved better results. But let's think behind that, and that's my last point, is behind that, why did Ireland achieve those things? Well, partly because it had a massive crisis in the 1980s and there was a wake-up call and policy changes were introduced taking advantage of that crisis, but why were they introduced and why did it not sink further into the mire in the 1980s? And I think we should look behind into a kind of Northean institutions because they are what are driving the adoption of reforms, the ownership of reforms. And why does Ireland manage to adopt reforms or did it manage to adopt reforms 20, 25 years ago? And I think it's the globalization, the way in which Irish people, not just policy leaders, Irish people are aware of the business world, they have family members in many countries around the world, migration is big, trade, foreign ownership of firms, they know how business works and even if they don't like in some ways how business works, they know what's needed to get the benefit from how business works. If I had time, I would show you the chart of unemployment in Ireland. Unemployment has just gone below 10% in Ireland now, which is a fantastic achievement. If you plot Irish unemployment against Euro-Ary unemployment, of course loosely they both went up in the crisis and they're coming down, but you don't get very close correlation. But if you plot it against UK unemployment, there it is, that's it. It's just part of the UK labour market in terms of unemployment and that's part of the globalization story as well. It's insurance, it's diversification. And so it drives a lot of things and that's my silver bullet but it's, of course, not a complete silver bullet. I did run over in the end, sorry. Now everyone knows why I invited you. You could have had another element of early measures which is the fact that from 1965 to 85, Ireland was the country of the WECD that increased the most expenditure in education, which of course was quite early on with spectacular results. Which added three quarters of a percentage point to GDP growth in the period 85 to 2000. Right, but this is a very important lesson too. Very good. Now we have Catherine, please. Oh, that education thing was great. It's a great opportunity, it's a great place, it's a terrific group of people and I've really been having a lot of fun. So this is an enormous topic that we've been asked to talk about here so you have to choose a lens that you're going to look through and so actually I'm going to look through the lens of public debt burdens and partly that's because of, as a number of people have said, that public debt burdens are an important driver of crisis, whether it be through market discipline or it be through Brussels discipline and so thinking about the public debt burden and what to do about that and how to get out of that straight jacket is an important question. I'm going to look at how one might do that with different kinds of structural policies and you notice that I try not to use the word reform for exactly the reason that Patrick has said. The word structural reform has become toxic in the political vocabulary. Changing it to structural policies at least makes it sound neutral like fiscal policy, monetary policy, it could be good, it could be bad. Structural policy is the same way and it's very clear that structural policies in the context of active demand management which is our way of saying fiscal policy can be used along with monetary policy is part of the package that I'm going to discuss and then finally I am going to address the issue of structural policy and inequality which came up in the couple of previous presentations because there are structural policies that exacerbate inequality and there are also ones that can be used to ameliorate it. So not that you need to know anything about public debt ratios but over here on the right-hand panel it's our pictures of what's happened with gross government debt by the Maastricht definition for the Euro Area 15 countries. This is the constraint that is being put on a number of countries in terms of what kinds of policies they can implement and how to move forward. Whether or not we agree with all of the complexity and strictures of the commission rules that's for another discussion but this is what it is. Now if we look at the decomposition of where the public debt dynamics come from which is the right-hand panel, part of the problem with the public debt explosion as a percent of GDP as you see in the left is the consequences of the denominator. I mean a little bit on the numerator of course too but a lot of it has to do with the denominator and inability of the countries to grow and grow their way out of the debt burden. If we look at some work that's been done by a colleague of mine at Brandeis where I was before I went to the OECD most recently, George Hall and Tom Sargent look at the debt dynamics for the United States and find that almost all of the periods of time starting from the Civil War up to the present how did the US grow out of very large debt burdens it was through growth, through total factor productivity and growth not through fiscal consolidation and not through taxation, either actual or by inflation. So growth is the key here. So what's the problem with growth? Well we could look at a lot of different dimensions of growth. I wanna focus on the investment component of growth as being a particular source or constraint on the growth in the economies and you can see in the left-hand panel how much growth in fixed investment non-residential fix so it's kind of business cap X kind of stuff, how much that has deteriorated for a range of countries including OECD countries that are outside of the Euro area. So weak business investment is obviously part of the story. It is explained by subdued demand. So we have a low level equilibrium where we've got low investment because demand is low and therefore jobs are not being created and therefore wages are not rising and that's a low level equilibrium. What we wanna do is get to the upper level equilibrium the high level equilibrium where we have higher investment because there's higher aggregate demand because there's investment, growth, jobs, wages, consumption and that demand, higher demand ratifies the investment that has been undertaken. So we really wanna get to that higher level equilibrium and how are we going to do it. Well we have a number of, we have a research, it'll be coming out as part of the economic outlook in June where we really decompose the investment problem into a number of different factors. Policy uncertainty is one of them and we know what it is in Euro area and we know what it is in the United States and in other countries as well. There's also restrictive financing conditions matter but not as much as you might think. Product market regulations are a key constraint on investment based on the work that we've done here and that the third, the last item there is that public investment which we've already seen is a important reason for why there has been overall sluggish investment. The public investment is one of the first things to be cut even though from a multiplier standpoint it has some of the highest multipliers. In keeping with the, what did countries choose to consolidate when they had to consolidate their fiscal positions they tended to choose things that had the highest multipliers which was not the thing to do instead of choosing things that they could have cut but didn't. So if we look at what the implication of the low investment is for potential growth because ultimately potential growth is what's gonna repay the debt obligations that were undertaken previously. That's gotta be through ultimately in a sustained fashion through potential growth. Let's look at the decomposition of the source of potential output per capita decomposing it into, which is the line over time as you can see. Decomposing this into where is the decline in potential output coming from. A lot of it is coming from capital per worker that's the blue. Also a lot of it is coming from failure or reduction in TFP. At least in compared to the 2000s. So wanting to look at both of those things separately. Now on the Yonker plan, this is one strategy to focus on to support a redirect of the public investment problem in Europe. Now the Yonker plan is not about the money actually because it's not a lot of money. The Yonker plan is something about regulatory harmonization and regulatory reduction. And the research that we have on regulatory harmonization and it's not down to the lowest level and it's not complete harmonization in regulations but regulatory harmonization, particularly in the network industries, telecoms transport energy, could increase FDI across Euro area borders by about 20%. So that's private sector response to the public sector initiative, not through the money catalytic effect but through the regulatory harmonization effect. The second reason why the plan offers some benefit is in the confidence building in the animal spirits aspect, in the sense that it creates a common vocabulary. There's not a lot of vocabulary that, just to be honest, that the Germans and the French agree upon. But this is one that says supply for those who believe that the constraints in the Euro area are on the supply side and demand for those who believe that the constraints are on the demand side. So it's a common vocabulary. In addition, since the Yonker plan is a, put the money into a pot and then it gets distributed out, it has the potential to target better investments as opposed to national priorities. These investments have cross-border prioritization at least in principle. Now, as I say, it's not a lot of money when we come down to it. So these other factors have to be important and from what we see based on these policy uncertainty variables in our investment equations and the role of collective action in our investment equations, these potentially have more bang for the buck than you might think. Now I'd like to turn to the second problem facing the Euro area in coming to grips with the debt to GDP burden from the denominator's perspective. So we wanna get potential output growth up. We talked about investment. The other approach is to, or other part of the story is to increase TFP. So what do we know about TFP? Well, we know that TFP in aggregate has deteriorated. Looking at very detailed, firm level data, the research that I'm citing here decomposes TFP growth into frontier TFP. Now these are firms in countries all around the world, actually not just in the Euro area. So the frontier firms in manufacturing or services, as you can see, the frontier firms are innovating at a very rapid and in the case of services, for example, an increasing pace. Yeah, there was a little downturn in the Great Recession, but they're back on track. What is not back on track is the diffusion of those frontier innovations to everybody else, which is demonstrated by the center line in red. Now the gap has opened up in manufacturing, principally opened up in manufacturing after the crisis, but in services that gap has, from the start of the data series onward has just continued to rise. So that points us in a direction of looking for constraints in what firms face in terms of what might be their challenges in the diffusion to everybody else. So I'm gonna talk about two different things in my negative one minute. Structural factors are one of the reasons why we do not have diffusion. So you have a bunch of different structural factors on the bottom, and you have a candlestick for individual countries. So at the top of the candlestick, it's how much like Canada gets from globalization in terms of being able to grab a hold of the frontier innovations. And then you've got Austria down at the bottom, not getting much benefit from globalization at all, in fact, hardly at all. And then in terms of participation in global value chains, much tighter, but there's still a differentiation. A key element of being able to diffuse, we've already heard this, is the ability to reallocate resources. That's what diffusion is all about. John Furnold talked about it, a number of other people have talked about it. Who is able to reallocate the most? Well, Belgium, according to this, it's a reallocation, there's a number of different things inside this pot. And here's Italy, not reallocating much at all. Now individual countries fit in different places along the candlestick, and the regression coefficient from a difference in difference is that center red dot. Knowledge-based capital, we already heard that also again in the extent to which knowledge-based capital, which is broader than IT, matters. And management, you can see there, again, how do you reorient business processes and workplace practices? It has to do with management. And so some countries have much better managerial capacity to get that diffusion from the frontier, and other ones don't. Now, there were skill mismatches and the sort of characteristics in the labor market that was considered in a number of different presentations. And basically, improving skill matching is a factor to improve labor productivity. So skill mismatches are measured on the horizontal, on the vertical axis, and then the yellow dot is how much labor productivity could be gained from reducing skill mismatches. This is using the PIAC data, which is the adult skills, the PISA is the education of the younger people. So what is it about the business environment that improves or causes deterioration in skill matching probabilities? And you can see along the bottom, product market regulation, employment, cost of doing business, transactions. This is just a subset of the menu of things that we look at in order to evaluate how much a country might improve its skill matching probabilities versus to have not an improvement in skill matching probabilities. So that's just a little thing. And then the inequality, which is my last point. These are, each one of these bars is how much a structural reform affects a different levels of income distribution, average, median, lower, and poor from different kinds of reforms, as you see along the horizontal axis. And most of these structural reforms improve household disposable income, even though wages might get more differentiated because more employment opportunities are created, you end up with an improvement. Now you notice limiting unemployment insurance for at the long-term end, those are the bars that are negative. Those are the bars where the low, lower middle class and the poor are differentially hurt by those kinds of reforms. So we'll leave it at that. Thank you. Thank you, Catherine. Interesting. Now I give the floor to Christoph, please. Thank you. Let's see if your take on German, French vocabulary is justified or not. Please, Christoph. Well, you could say now for something completely different. Yeah. Very good. In a sense, thank you very much for the invitation. Yeah, no, no, of course. Let me start by coming back to President Draghi's introductory speech yesterday. He clarified that monetary policy might be able to lead an economy back to its growth path, but structural reforms would be needed to raise that potential. He also made clear that expansionary monetary policy serves to make reforms less costly and therefore rather support reform efforts, so far so good. And there are no excuses, he clarified for the individual governments in Europe not to undertake sensible reforms. But one question immediately emerges, which is, do voters in these countries know that their current situation is much better due to this policy than it would have been otherwise? You don't have to go far to find an illustrative example for the relevance of that question, because if you talk to many Germans in evening sessions, when you talk to the general public, you often get the question, aren't we under the pressure, they think people voice the concern that it's the ACP's policy that is at fault for their savings being destroyed, not the crisis, they don't understand the causality. Similar or variant of that question is, do voters understand that current times of ensuing recovery are indeed the best times to pursue, to conduct, to implement structural reforms? After all, you need to be convinced that after reform you are better off than before and people tend to do before-after comparisons. The lesson is quite clear. Policymakers do not only have to get the counterfactual right themselves, they also have to convince their voters that they managed to get it right. And this is obviously quite in contrast to the usual before-after considerations that you see in general discussions. And I would put forth the thesis that, or the question, who if not the national governments of the Euro area member states, the individual governments could have the knowledge, the mandate and the credibility to advocate and to conduct structural reforms. I'm quite unconvinced that the general approach, the top-down approach that has been advocated this morning several times, especially in the nice paper by Tito, that that's the right strategy. I'm quite confident that there are good arguments for objecting to this suggestion. Now, I have two sets of remarks, deepening that a little bit. One going to the identification of the right strategy, the identification problem, and one to the governance, the governance issue. Now, let me start with the identification problem. The question is, of course, what are the right set of reforms for any particular member state? And more specifically, one needs to ask who is identifying this right set of reforms and how will they be identified? The introductory remarks yesterday, I come back to that, were giving us two messages, one of which I find very constructive and one of which I think should be qualified. The one that I found very constructive was to define structural reforms in very general terms as basically all sets of reforms lifting the potential growth path and thereby by offering this very general definition wisely avoiding to indicate that the right set of reforms might be the same everywhere. But what was suggested yesterday in these remarks and what was echoed today, a more detailed fashion in Tito's paper was the suggestion that the German way, especially to extend short-time work arrangements during the downturn to use lifetime work accounts and overtime accounts and so forth to cushion the shock, our devices, using devices to reduce hours while retaining the jobs, that might be the preferred strategy for countries hit by a macroeconomic shock. But I would rather qualify that because this strategy of emphasizing adjustment at the internal margin worked for Germany in 2009. It worked well for Germany, but it worked for Germany because the retained jobs became productive again after the shocks subsided. German companies in the automotive, the machinery, the chemical industry are those strongly competing on the world markets today as they were before the crisis. We had just simply as the economy, we had just simply a dose of good luck that the institutional arrangements which emphasize obviously internal flexibility and the nature of the shock that hit us were so highly compatible. I don't think that other member states would be well advised if they had to pursue only this strategy or the same strategy with the same emphasis on retaining jobs. Let's say in the construction industry in Spain, that obviously wouldn't have made that much sense. And to be frank, I don't think that Germany is so well prepared to a future shock if this shock were to challenge its portfolio, its persistent decline in interest in German cars might not be so easily cushioned. And actually, but that's not the topic today, the German government in the moment does a lot of making this basis for cushioning persistent shocks less viable even. The lesson here is clear, it's prudent and I think that's one of the big points of Tito's paper that I would support. It's prudent to be prepared for different kinds of shocks, potential shocks, installing elements of internal and external flexibility at the same time. But quite obviously it's not a matter of maximizing flexibility, having the lowest wage as possible or anything of the sort. It's a matter of balance. It's a matter of balancing continuity and flexibility. I'm quite convinced that German workers have high investments in human capital specific to their firms, specific to their sectors, also because employment protection is strong in Germany. It's always a matter of balance between flexibility and continuity and that again has to be found at the national level best. It can be found best at the national level. What can we learn from the German experience though? I think we can learn a lot about the process and about things that we have discussed and we're discussed this morning. First of all, you have to understand, I think that it's an answer. It has been an answer to structural deficits that Germany and the German labor market has been characterized by throughout the 80s and 90s. So it only came about through pressure. There wasn't a wise German decision made in front of the before the crisis hit and then it worked out. No, it was coming under pressure. So it might well be that in a model world you might be able to find the best, the optimal policy. But I think that Gilles, for example, was really clear in his remarks that the political economy of this is quite different. Other people in the room also echoed on this. Secondly, reforms were only amplifying what was going underway anyway. The social partners with their wage restraint were the more vital part of all these developments. So it might well be that in a theoretical, in abstract thinking you might be able to say, well, let's change the bargaining structure but you need the social partners to feel the pressure to change in order to get something like that implemented. Now, third point, labor market reforms and that reflects on the point made by Catherine this morning, labor market reforms are only part of a more encompassing package of reforms to the tax system, to the pension system and so on. So the best labor market policy might not always be a reform on the labor market or to labor market institutions. I think understanding these aspects also helps qualify the apparently confusing cross-country evidence. Now, Germany was on a way down the German unemployment rate, the structural unemployment rate because of all the things that were altered in the German economic structure was on the way down during the time the crisis hit. It was not a consequence. It should not be mistaken as a consequence of particularly well-taken crisis management. You have always these two things, structural and cyclical and to disentangle them is quite difficult, obviously. So it's profoundly important generating any suggestion for reform. It's profoundly important to really disentangle or distinguish between correlation and causation. Why is identification of the right set of institutions so tricky? Just to reiterate maybe. First, we have very highly institutions and we learn a lot from the papers written by Tito about it. Institutions are highly complex web of arrangements which come about as the outcome of historic developments and reflect social preferences. A web of arrangements so complex that it has certainly a higher number of facets than we have numbers of observation. If you really go into the details that the detailed structure makes the difference. The second conclusion from that is identification doesn't only need theoretical and empirical theoretical thoughts, theoretical knowledge and empirical skills but also an intimate knowledge of the idiosyncratic characteristics of the specific labor market. I give you a brief example, not understanding that Germany has had for a long time an implicit minimum wage set by the arrangements for income supplementation in order to provide poverty relief might lead you to the suggestion as an ill informed outsider that Germany should now introduce a statutory minimum wage to boost disposable incomes. But this would be bad advice because it would just ignore that the situation is more complex and that you would rather destroy employment and destroy demand by introducing that. Then third point and last point on identification. Some of the countries we are looking at in the pictures that we have seen are going to a post-Tratokhoyloven situation. Now most of you won't know what I mean with that. I think that we saw yesterday, Olivier used nonparametric regression to show us that the growth rates were more, less deeply sloped often after the recession hit. Ottmar Ising was reminding us of the writings of Hayek. I'm being more simple-minded, I think of the world of sports and you probably all remember that in the early 80s, late 70s, early 80s, world records were set at a tremendous pace. And nobody epitomizes that more than Jamila Kartokhoyloven, the Czech athlete who still holds the 800 meter world record. So if you were actually asking yourself, are the figures from that time, are they telling us really very sensibly in a very sensible fashion something about the way that good nutrition, exercise, and devotion to your sport is leading you to the borderline of human capacity to achieve? You would probably not go to these figures. The same thing with several of the unemployment figures you look at, basically it goes back to the point that Marco Bouty made and the discussion of Gilles, you would rather not see that as a reflection of the genuine state of the economy, for example in Greece, to provide sustainable jobs. Rather you would see the increase in unemployment as a correction towards the state that was genuinely present. So this identification assumption makes a big difference because if you say before the crisis everything was in order and now we have high unemployment rates, of course you come to the conclusion that it's all a matter of demand and you don't need to, you should not conduct structural reforms at the time being. Three points about governance and then I'm through. First of all about the architecture. We are a union of sovereign states according to the setup of the European, the EU area. We have already many people talking about a demographic, not demographic, democratic deficit in the EU and at that time with this high skepticism about the legitimacy of top-down procedures to introduce something like the European Commission governing, steering labor market reform seems not convincing to me. Secondly, you indicated that there are papers, Tito, that there are papers showing that one might construct, one might be able to construct common unemployment insurers and things like that in a way that is working not to generate persistent transfers. But we have a good proverb in German saying, no legislative procedure leaves the parliament the same way it goes into the parliament. That means you can construct it in a very nice fashion but if it's fragile to the setting of the parameters you don't know what you get. So I think it's a very, very tricky affair and who in the end decides what a reform is? You say, well, you will get benefits because you engage into reform. Who decides what is sufficient to be eligible for support and actually why should some countries pay other countries, some countries, taxpayers pay other countries for doing something that benefits them. Last remark, quite a general, let's step back for a second from the crisis discussion and ask ourselves about the setup of Europe. How should we be able, do we want to be able to benefit from our diversity? We benefit from it because the competition of different approaches shows us in the time and the course of time what's working and what's not working. And new challenges will come about. Harmonized imperfect policies are still imperfect and it's always a difficult thing to find out what works and what doesn't and having a very harmonized approach might not help in the long run. Thank you. Thank you very much, Krista, for reminding us in detail that the national, the insecurities matter very much and that the, not necessarily the German experience can be extrapolated to other situations. So it's indeed a, I think, wise message. So, Jean, please. Thank you, Vitor. I'm very pleased to be on this panel, not least because during the coffee break, everybody was asking me why we're not reforming faster in France. So it's a relief to have the opportunity to talk about reforms in general, not specifically about Michael. What I would like to do is read to go back to the core of the discussion we're having, which is on the one hand we're saying there are reasons to think about reforms in taking into account the framework of the euro area in general. So about coordination, if you wish. And on the other hand, everybody agreed that there are deep national dimension there. And so the question is whether there is a way out of this sort of conundrum. We have a lot of new procedures and these procedures have been analyzed. They've been put in place in response to crisis, the macroeconomic imbalances procedure with a country-specific recommendation and then we have the flexibility within the pact and we have further proposals for reform contracts and we have obviously the exhortation by the ECB and all that in terms of whether it delivers, whether the system delivers, I think we can be skeptical for all the reasons that have been given. And so some would say, okay, let's go back to the, and that was very much what Christopher was saying, let's go back to the national responsibility, let's forget about the common framework and let's consider that reform is interestingly national. So the first thing perhaps is to discuss again whether there is a case for a common approach. And long ago, about 10 years ago, there was a paper by Charles Vipros and Guido Tabellini about coordinating structural reforms. And basically the conclusion was the case for reform coordination, structural policy coordination is very weak. Essentially they were saying these reforms benefit the countries that undertake reform and they spill overs if any are positive and they are pecuniary. So there is not a strong case for international coordination. I think this is basically true, but not in a monetary union. I mean, basically they were discussing the Lisbon agenda. They were not discussing a situation in monetary union. And I think Mario Draghi put very clear yesterday what are the reasons specific to the monetary union, why there is a case for having a Uriah-Yah wide approach to these reforms. And this has to do with the functioning, which he calls the resilience of monetary union, which has to do with the internal imbalances, which has to do with the transmission mechanism of monetary policy, which has to do with all what keep the Uriah-Yah together. And this has to do with the collective benefits from reforms that would enhance the gross potential. And this is particularly relevant in the current context, where there is a recovery and there is a question about the pace and the potential for further growth. So the normal times case for coordinating reform, which is that if you do some reform and you create some potential, then without the support of monetary policies, the short-term benefits are going to be weaker. So there is a collective action problem. This remains true, but there is more to it. There is a situation in which we're in where there are limits to what you can do with macro policy instruments, so you want in a way structural reforms to supplement. And what has to do with the risk of hysteresis that we discussed yesterday. So case is stronger. And I agree with the observation that reforms are generally conducted in bad times, so you may just wait for the next crisis and hope that it will trigger a new wave of reform. But that's not the problem of today. Today we're in a recovery phase. So the incentive for reform coming from the fact that governments are shoulders against the wall is going to diminish. So the question of the day is whether we can actually trigger more reforms in good times. Now, the problem so that in the one hand, we want some more centralization, on the other hand, some more decentralization and what the way out. I would suggest that what has to do with the coherence between national policy and participation in the monetary union could be decentralized to institutions at national level that would really be the voice for it. We have the example of the fiscal councils. The fiscal council, they were introduced by the treaty, the TSCG, having observed that there are limitations to what can be done top down. And it's early to say, but my impression is that the fiscal council at national level they're making a difference. So basically they are a network of institutions with a similar mandate. But very much part of the national discussion that are actually informing policymakers, informing parliament, informing public opinion about what are realistic forecasts, about what are realistic budget forecasts, in some cases what is a sustainability perspective, in some cases what the cost of new measures that are being introduced. And this is changing the domestic conversation about fiscal policy and sustainability. And this similar approach has been proposed actually by André and Guntram-Volff or by Agnes and Xavier Hago, but competitiveness council. So to use exactly the same approach and to have at national level bodies that would actually be entrusted with the responsibility of assessing in relative terms. And I would add on the basis obviously of common methodologies because the question of internal consistency of the assessment of the competitive position is extremely important. Though that they would be able to make this assessment and to make recommendations, being much more granular in the recommendation they can make, being much more able to also push for ideas in the national conversation without having this sort of top down, not very detailed or if detailed, not very appropriate approach that Tito has criticized with the reform approach that has been introduced. Now, would it be sufficient or is there a case for more? I think there is a case for more and I would like to go back to the other idea that the positive conditionality that was proposed in the paper by Tito and Juan. There is a question of the incentive to reform. And this question of the incentive to reform comes from the externality that have exist in the context of monetary union. So this has been taken on board with the flexibility within the pact, saying if you do reform, you may have some more leeway in your fiscal adjustment. But that only works for neither for countries which are in a sound fiscal situation because they don't need it, nor for countries which are in a bad fiscal situation because they don't qualify, they have to be basically below 3%. So it's a relatively narrow approach. Then there was a approach proposed by or attributed to Chancellor Merkel, the contract saying if you reforms, you're going to be, you're going to put forward a program for reform and we can discuss on this basis, but never said exactly what you would discuss. But this started from I think a good observation, which is that it's better to start from what governments can propose, what government can consider appropriate and feasible in a particular context rather than from the sort of top-down approach of advice from the commission. The problem was that it very quickly looked like in sort of Troika program light. And for this reason I think it cannot fly. So the positive conditionality approach in a way would be a sort of response, essentially that would consist in and I think there are two ideas in your paper. One is to create a sort of EU scheme and to say this is a scheme supported by the EU or the URIR, there is so many attached and you can qualify. Now if you don't want to qualify for it, there are conditions, there are local conditions. Conditions that depend that are attached to the purpose of the program. So you're not asking to reform, I don't know, taxation is if it's something linked to labor market protection. So it has to be very closely linked to the purpose of the program you're putting forward. And the program has to correspond to a common goal, so on which there is a rationale for the EU or the URIR to push for it. Now you can choose to qualify or not. If you do qualify you have to fulfill a certain number of conditions and this is absolutely something that it's impossible to reject because if you have a program that will favor, I don't know, youth employment, then you don't want countries to apply while at the same time keeping policies that run against the very purpose of the program. So this is difficult to dispute. So I think the scheme of this sort could be used in several fields. Labor market, you could think of fields where is a common interest in pushing for it. Also for universities for example, or for various fields. Now there's another idea in your paper which is to go to the citizens as you said. So essentially it's the suggestion that you would be creating a sort of 20th regime at URIR level. So you have the national regime and you would create a different regime for labor contracts or for whatever with specific rules, with specific payments, et cetera. And I'm not entirely sure, and I think we do need to discuss much further what would be the effect of creating a 20th regime. Because it may help reform domestically or it may have a sort of opposite effect. But I'm sure the first idea of introducing a program with U-support has potential. I'm sure also that to break the taboo that the U doesn't speak to citizens, it speaks to entities, but never to citizens also has a potential. And I think this is a good reminder that we do have a very large, in absolute terms, a very large budget in the EU. And that we're using this budget for purposes that have nothing to do with the stated goals of our currently stated goals, our priorities. So we could use this budget to push, to support initiatives that would foster employment, that would foster potential output goals in an incentive way. And I think the potential for that is significant in view of the monetary. So I would say we should just do it. Thank you.