establishing price stability in the euro area. in this sense they are all in the same boat and nothing is more likely to capsize the boat that a national preference. that, i believe, will characterise what happens in practice. in any event, a distinct, transparent policy right from the start is vital in order to avoid unnecessary uncertainty that could result in exaggerated movements in exchange rates and interest rates. other components of economic policy in the long term it is the construction of monetary policy that determines the rate of inflation. in the shorter run, however, price movements are also influenced by other economic factors. other components of economic policy - that is, fiscal, labour - market and structural policies - therefore have to be constructed so that they support the policy drive for sustainable price stability. if these components do not work, the burden on monetary policy becomes additionally heavy. economic policy apart from monetary policy will continue to be a national matter in the euro area, even though it is the subject of agreements at community level. fiscal policy will still be constructed by the national governments, though to some extent its scope is restricted by the stability and growth pact, to which all the eu countries subscribe. this pact requires each country to conduct a responsible fiscal policy, defined as achieving a general government budgetary balance or surplus over the medium term. each country is also to allow continuous monitoring of its government finances by the other eu countries. a government budget deficit is normally not to exceed 3 per cent of gdp, though there is room for certain exemptions. if a country in the euro area does have a budget deficit above 3 per cent and this cannot be explained by factors that are exceptional and temporary, sanctions are to be imposed. eu countries outside the euro area are not liable to sanctions, however ; they are only included in the monitoring provisions of the pact. the task of establishing price stability in the euro area will be facilitated if low inflation in the area is also promoted by fiscal policies. the importance of fiscal policy lies both in creating sustainable government finances, which contribute to the general credibility of economic policy, and in countering tendencies to excessive price pressure in the economy. in that the single monetary policy is to be constructed in relation to the overall situation in the euro area, more will be required of fiscal policy in the context of national stabilisation policy - fiscal instruments will still be available for stabilising national economic trends. but this in turn does presuppose that there is room for manoeuvre in

policy in 2022 is about more than just policy interest rates : the balance sheet of the eurosystem will also be examined. to mitigate the risk of deflation or another financial crisis during the pandemic, the ecb purchased bonds on a broad scale and provided loans to banks under favourable conditions in recent years. with monetary policy being tightened, these instruments are also being adjusted. conditions for tltro loans were recently tightened, and in december we will discuss the scale - down of the bond portfolio that we plan to start next year. at the same time, the ecb can use the transmission protection instrument ( tpi ) to prevent disruption to the smooth transmission of its policies in the euro area. the ecb governing council can activate the tpi and temporarily resume bond purchases if it identifies disorderly market conditions while fiscal policy still meets all agreed conditions. there has thus far been no need to deploy the instrument. how does this affect dnb's balance sheet and profitability? monetary tightening will lead to expected losses for dnb ( as explained in my letter to the minister of finance on dnb's capital position, dated 9 september 2022 ). we will absorb losses by drawing on our buffers and our provision for financial risks. it is worth noting in this regard that central banks outside the euro area, even those with a different monetary strategy, are also expecting significant losses due to current market developments. dnb's loss should be seen in broader perspective. making a profit or loss is inherent to the conduct of our tasks as a central bank. the expected losses stem from monetary measures that have produced major public benefits. for example, our shareholder, the dutch state, benefited from savings on interest payments estimated at eur 28 billion between 2015 and 2021, which is significantly more than the profit distributions that are expected to fall by the wayside in the coming years. impact of rising interest rates on debts the effects of monetary tightening are visible in sharply higher bond yields and mortgage lending rates, which leads to higher financing rates for households and businesses. the relatively high level of household debt in the netherlands is a vulnerability. financial risks may materialise if outstanding debts need to be refinanced or if house prices fall. there are clear signs of a turnaround in the housing market. some cooling in the overheated market is desirable, but a fall in house prices could have negative macroeconomic effects as consumption declines. the financial position of homeowners is healthier