years before entry into the euro. to support this process, it is urgent to improve euro area growth rates, which are projected to remain low for a number of years. this can be done by unlocking the many rigidities that still exist in euro area product and labour markets. this process of debt stabilisation is already well underway. the imf projects that the euro area will be almost in primary balance this year, with an average debt level just over 90 % of gdp. in terms of fiscal consolidation, this puts the euro area significantly ahead of some other advanced economies. bis central bankers ’ speeches how to deal with intra - euro area competitiveness imbalances? ensuring debt sustainability is to a large degree linked to the second question of today ’ s panel : how to deal with intra - euro area competitiveness imbalances? to some extent, this question is already answered. rebalancing is happening. large competitiveness adjustments are taking place in the so - called periphery. the countries under full eu - imf programmes have seen unit labour costs improve by around 10 % since 2008, relative to the euro area average. current account deficits are on average 8 percentage points of gdp lower than they were then. but to ensure that this competitiveness improvement is structural rather than cyclical, three further elements are crucial. first, continued and determined reform. and this ultimately has to go beyond economic policies and into fundamental issues of governance, like public administration, judiciary and education. second, the completion of europe ’ s single market. it does not serve citizens to protect local monopolies that lead to high prices and low quality. europe has some of the world ’ s most sophisticated and innovative companies, and they should be operating on a european scale. third, stronger economic governance. we have already made some progress here with a new procedure to monitor and correct euro - area imbalances. but we also need to find better ways to incentivise continued structural reform, including through the use of common funds. all these measures are of course relevant for the country most in the media spotlight, greece. a lot has been done by the greek authorities in last two years. the primary deficit has been reduced by more than 8 pp from end - 2009 to end - 2011. labour market reforms are beginning to show positive results. but a lot still remains to be done. the greek authorities have to demonstrate that they can continue to stick to their commitments. we are seeing encouraging signs that the

long time lastly, the experience over the past two years suggests that portfolio rebalancing effects might be highly persistent. despite the sharp rise in interest rates, stock market valuations remain high, especially in the united states. [ 51 ] and house prices have corrected somewhat in some countries but not in others. in germany, for example, despite residential real estate prices declining by nearly 13 % since mid - 2022, prices in metropolitan areas remained some 15 % to 20 % higher than the values implied by economic fundamentals in 2023. several factors, including supply constraints and strong demand in housing markets as well as declining volatility in financial markets, may have contributed to the broad resilience of asset prices. however, another factor may be the pace with which central banks unwind the stock of purchased assets. central banks typically take a cautious and gradual approach when reducing the size of their balance sheets, as too fast a decline in bond holdings could cause congestion effects in financial markets and as banks need time to adjust to the fall in excess liquidity. this gradualism is probably one reason why quantitative tightening ( qt ) announcements are often found to have smaller effects on bond prices than qe announcements. [ 55 ] that is, the stock effect matters also when monetary policy portfolios are reduced. since bonds held by the central bank mature only gradually, investors may heavily discount redemptions that are due far out in the future. this is consistent with three pieces of evidence. first, using micro data on the interest rate and balance sheet expectations of market participants, ecb staff estimate that the unitary effect of qt on term premia is not significantly different from qe ( slide 12, left - hand side ). second, today, despite the start of qt and the significant increase in public debt in the aftermath of the pandemic, the bond free float in the euro area is not expected to reach the pre - app level anytime soon ( slide 12, right - hand side ). third, new empirical evidence suggests that the effects of changes in the expected path of government debt on interest rates are materially lower – possibly by as much as half of the estimated impact under perfect foresight – when investors have limited foresight for changes that may occur in the distant future. as a result, risk premia may remain compressed in many market segments, making financial conditions more accommodative than they otherwise would be. this may have weakened the transmission of monetary policy during the recent