Firstly, national fiscal policies should contribute to maintaining the framework of stability The single monetary policy cannot, by itself, ensure price stability in the best possible conditions. Fiscal policies must respect the letter and the spirit of the Stability and Growth Pact. In the absence of a significant Community budget, the close co-ordination of national fiscal policies and careful peer surveillance within the Council of the Eurogroup and the Ecofin Council—consisting of the Finance Ministers of the 15 member countries—are indispensable for there to be an appropriate policy mix for the euro area as a whole. This surveillance is all the more necessary as Monetary Union introduces a degree of interdependence in fiscal matters. While the short-term macro-economic effects of an excessively expansionary national fiscal policy remain fairly restricted to the domestic economy involved, the costs in terms of risk premia on interest and exchange rates are borne by all members of Monetary Union. Under these circumstances, the Pact allows well-managed economies to avoid unwarranted risk premia by organising a system for sanctioning excessive deficits, thus helping to prevent such deficits. Furthermore, the purpose of the Pact is to allow national automatic stabilisers to come into play where necessary. Its medium-term objective, which stipulates that public finances must be close to balance or in surplus, encourages the Union's Member States to re-establish as fast as possible the leeway allowing them to cope with cyclical swings or any asymmetrical shocks affecting one of them without exceeding the 3% deficit ceiling.

9  For sterling markets, see https://www.bankofengland.co.uk/markets/transition-to-sterling-risk-free-rates-from-libor https://www.isda.org/protocol/isda-2020-ibor-fallbacks-protocol/  10  4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  3. Reducing the legacy of post-2021 LIBOR-linked contracts  Sadly it’s not only in derivatives where pre-existing fallback arrangements have been absent. Until recently, few contracts in other markets envisaged the potential for a world without LIBOR either, leaving borrowers and lenders alike exposed to serious uncertainty and the risk of a disorderly outcome. Where those contracts are expected to remain outstanding, the best chance of avoiding those risks lies in active conversion to another rate before the end of 2021. For sterling, the industry-led Working Group has strongly encouraged all market participants to complete, by the end of next March, a full assessment of their LIBOR contracts extending beyond the end of 2021. The aim is to identify those that can be actively converted, and to put plans in place to complete those conversions wherever viable by the end of next September. This advice is echoed more broadly by the FSB in its global transition roadmap. 11 If you haven’t done so already, you should be making a start on that assessment. To stand a chance of controlling your destiny, you need to know what your exposures are, and how you’re going to deal with them over the course of next year. Make and resource those plans now – we don’t want anyone to be caught out. And the regulators will be watching closely.