They should also help to sever the problematic public finances/banking system feedback loop, a vicious circle which contributes to prolonging the climate of uncertainty and makes it difficult to resolve the problems facing the euro area. Nevertheless, it should not be forgotten that the scope of these actions is limited and that definitively overcoming the crisis in Spain will depend on the progress achieved in other domains, including those which depend on our own economic policy. The Spanish economy The challenges facing the Spanish economy are well-known: reducing its high dependence on external financing, sustainably correcting the budget imbalance and strengthening the drivers of medium- and long-term growth through substantial and lasting improvements in competitiveness. Naturally, completing the clean-up and restructuring of the banking system is also a key factor in this strategy, and I will briefly refer to this later on. Significant steps have been taken in addressing these challenges. Nonetheless, the ongoing adjustment of the Spanish economy is at a delicate juncture, since there are no perceptible improvements in activity and job creation because many of the measures taken are structural and will take some time to work fully through. The growth outlook for the coming quarters is still not favourable, as shown by the forecasts released by different organisations in the past few weeks, which point to a fresh contraction of activity in 2013. However, the adjustment undertaken is essential in laying the groundwork for a new phase of economic growth which will allow a substantial and lasting reduction in the unemployment rate.

Unlike inflation, where falling behind the curve would entail a degree of pain down the road when policy eventually needs to catch up, there is no catching up if we fall behind the curve on climate change. It is a one-shot game. And the consequences of getting it wrong would be catastrophic. Responding to climate change is not simply about taking into consideration the effects of the green transition on inflation, nor the possible repercussions of physical and transition risks on financial stability. But it is also about actively taking steps that helps influence the incentives and willingness of society to alter their behaviours in such a way that mitigates adverse climate change. The most impactful channel for central banks in this respect is through the financial system. Incentives, mindsets, and expertise in the financial sector must be geared so as to ensure that sufficient resources become available to finance the green transition. This requires a collaborative approach, both among agencies within a country, as well as internationally. Initiatives being pursued by bodies such as the Network of Central Banks and Supervisors for Greening the Financial System are therefore critical. Forging ahead amidst shifting grounds Mervyn King once said that central banking should be boring. There was a time when that was true. There may come a day when it is true again. But that is not today. The task at hand is far from straightforward. Maintaining economic and financial stability amidst the shifting fault lines will require a steady hand.