think so, because the euro area has only been in existence for just under 13 years, and prior to that, other countries, everywhere in the world, had experienced similar problems to those that greece is experiencing today. moreover, we are seeing today, unfortunately, that the issue of poor fiscal discipline is arising more often in developed countries, whereas before it was only an issue in developing countries – in asia, latin america or the near east. greece is a symbolic example of this turnaround. and what is the reason for this turnaround? the fact is that the monitoring of economic and fiscal policies in the euro area was not as good as it should have been. the ecb and the banque de france – christian noyer and myself – have always said with regard to europe that the stability and growth pact was not an artificial creation conveying an ultra - orthodox view of the economy coming from across the rhine. it was a fiscal framework that was absolutely necessary for a monetary union that had neither a federal government nor a federal budget. on behalf of the governing council, i publicly denounced the liberties that in 2004 – 05 germany, france and other major countries wanted to take, and indeed took, in the form of a stability and growth pact that was weakened both in letter and in spirit. we have constantly called for closer monitoring, not only of fiscal policies, but also of indicators of competitiveness and internal imbalances. today, in the light of the crisis, everyone can see that we were right. and that you have a better chance of being listened to … i sincerely hope so. over the last few weeks, you have fought against the idea of asking the private sector ( banks, insurance companies, funds, etc. ) to incur losses to help greece. it would seem that the heads of state did not listen to you? once again, we have always said publicly that it is not the central bank that takes the decisions, but the governments themselves. with regard to private sector involvement and greece, we have had three very clear messages. first, we said that any participation had to be voluntary. as far as this is concerned, our advice has been followed. second, we said that it was necessary to avoid a “ credit event ”, and at the moment, it looks as though we have done so. lastly, our third message was that a “ selective default ” should be avoided. however, in the event of such a default, governments would have to recapitalise

- round effects such as the risk of a persistent upward shift in inflation expectations. at the same time, we are carefully monitoring the smooth transmission of our monetary policy stance throughout the euro area. the lasting vulnerabilities caused by the pandemic still pose a risk in this regard. therefore, we also decided to continue applying flexibility in reinvesting redemptions coming due in the pandemic emergency purchase programme ( pepp ) portfolio. moreover, our new transmission protection instrument ( tpi ) is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries. financial stability in the euro area turning to the impact on the financial sector, overall financial stability conditions have deteriorated this year. rising inflation and the worsened economic outlook in combination with tighter financing conditions are aggravating pre - existing vulnerabilities in both the non - financial and non - bank financial sectors – while in the banking sector profitability is, at least partly, supported by higher interest rates. financial markets are vulnerable to changes in expectations about growth and inflation, as well as to changes in the monetary policy outlook. tighter financial conditions have already resulted in a significant market correction in the first half of the year amid rising cross - asset correlations, notably between equity and bonds, two segments in which investors suffered the largest losses. some market segments are still pricing in rapidly declining inflation and a mild growth slowdown, an assessment which could turn out to be too benign. in addition, investors do not expect the growth slowdown to significantly challenge corporate solvency or profitability. over the next 12 months, corporate earnings are still expected to grow, while speculative - grade default rates are forecasted to pick up only slightly. but euro area corporates are facing continued headwinds from high input prices, higher borrowing costs and lower sales. industrial producer price inflation in the euro area exceeded 40 % in june. the resulting margin squeezes could limit firms ’ debt servicing capacity, particularly in the case of firms that are highly indebted and are still suffering from the repercussions of the pandemic. moreover, high input costs affect production, especially for manufacturing firms, whose heavy reliance on natural gas makes them more vulnerable to high energy prices. higher inflation is also squeezing households ’ disposable income. families have to divert a larger fraction of their income towards everyday consumption, reducing their debt servicing capacity. as lowincome households all