##gencies within emu do need addressing. one important reason for growing heterogeneity within the euro area is that the benefits of monetary union, in particular lower interest rates and the elimination of exchange rate risk, have not always been used wisely and have tempted some countries to live beyond their means : too often inflowing capital did not reach the most productive sectors, and in some cases cheaper and easier access to funding led to excessive credit dynamics facilitating a rise in household and corporate debt and ultimately causing the real estate markets to overheat. in addition, fiscal policy often failed to use higher growth and lower interest rates to reduce deficits sufficiently. in economies with rigid or only partly flexible labour markets all these large expansionary stimuli resulted in accelerated wage increases that were well in excess of productivity growth, reducing price competitiveness and exports of domestic firms. consequently, price competitiveness has diverged significantly from one euro - area member state to another since the introduction of the euro. whereas a small group of countries, led by germany, has achieved gains in price competitiveness, a larger group suffered significant losses, amongst others greece, italy, spain and portugal. these underlying economic divergencies within the euro area are also reflected in persistent discrepancies in the current account positions of emu member states. as long as a flourishing world economy and the growth dynamics within the euro area masked the associated problems, those developments were neglected. however, the financial crisis has revealed the unsustainability of this state and therefore increased awareness of the risks it involves. these risks imply depressed future growth prospects, disturbances in capital flows if markets doubt the sustainability of large external borrowing requirements as well as difficulties for monetary policy as a result of the growing heterogeneity of euro - area member states. hence, correcting the structural problems that are at the root of the economic divergencies is one of the major challenges for the future : for example, domestic firms have to become more competitive by increasing productivity and keeping costs in check, labour market flexibility has to be increased in order to mobilise a larger share of the working age population and to facilitate reallocation of workers to more profitable sectors. and structural deficits have to be brought down to sustainable levels by broadening the tax base or, preferably, cutting expenditure on government consumption and certain transfers. taking the current account as one indicator of the extent of these divergencies, one could get the impression that the financial crisis has halted

advance the sustainability agenda by fostering environmentally responsible and sustainable policies and work practices, as well as integrating environmental, social and governance aspects in the bsp ’ s key operations or functions. but even before this, we have participated in the green bond fund launched by the bank for international settlements as part of sustainable investing in reserve management. the bsp also adopted mechanisms that resulted in the reduction of paper usage and increase 4 / 5 bis central bankers'speeches of energy efficiency. the bsp is also active in both regional and global conversations on climate change and sustainable finance. bsp is a member of the network for greening the financial system ( ngfs ) — a group of central banks and supervisors organized to enhance the role of the financial sector in managing climate and other environment - related risks and mobilize capital to support the transition towards a sustainable economy. lastly, to facilitate the mobilization of funds towards green or sustainable projects, the bsp collaborated with department of finance and other key government agencies, coined as “ green force ”, that is embarking on the development of a principles - based taxonomy. in these trying times, the way to move forward is to transform. we will continue to rethink and reimagine ways on how to better improve our policy, tools, and capacity as a central bank and supervisor. we will remain steadfast and committed to the fulfillment of our mandates as we continue to : 1. transcend the wave of digitalization 2. rally and champion the cause for sustainable finance. the bsp has embarked on a journey towards a more resilient financial future driven by our sustainability agenda. 3. advocate and appeal for the legislation of critical pieces of laws in support of economic recovery and financial stability. 4. navigate with sustained effective risk governance and management systems. we have laid the groundwork for a sound risk management system of our bsp supervised institutions and as we continue to craft meaningful reforms, we will consider and keep tab of the evolving risks, international standards and best practices. 5. sustain the momentum and 6. form the future towards a more stable, sound, resilient and truly inclusive philippine financial system. as we take on this path, we hope that the business sectors will join us in this journey to recovery. let us transform together towards a better future. thank you! 5 / 5 bis central bankers'speeches