other major global currencies, while in the fixed income, again the us will continue to offer one of the highest interest rates in the developed world. for example, us 2 - year treasury yields are the most attractive among the g10 economies, a situation highly unusual and unprecedented since the turn of this century. the main driver behind this is us economic policy, which – if you allow me to use a catch phrase – may be described as follows : “ fed up, with tariffs ”, plus of course the drop in tax rates. in the eurozone financial markets, the normalisation of ecb ’ s monetary policy remains the main driver of the still fragmented euro area government bond market. the core euro area countries form a rather homogeneous group ; the europeriphery, by contrast, is less homogeneous. the diversity is due to recent developments in italy, headed by a fragile, populist coalition government. indeed, as a result of the latest political turmoil over immigration and the budget debate, the italian 10 - year yield has reached 3 % and remains in this area since august. other peripheral countries such as spain and portugal remain resilient and contagion remains limited. italy is not greece. it is too big to ignore, as the eurozone ’ s third largest economy and the world ’ s third largest, after the us and japan, sovereign debt market with total public debt of more than €2. 3 trillion, of which more than 36 % is held by foreigners, and the political uncertainty could generate severe spillover effects to the global sovereign markets. there is a nightmare scenario which i do not share, of which markets are of course aware and already factor it in. this political tit - for - tat between the populist government of italy and brussels may escalate into a genuine 3 / 5 bis central bankers'speeches diplomatic war ( for some people, what is at stake here is the next italian prime minister ) and this would lead to a downgrade of italy ’ s credit rating ( currently at bbb ), and a potential loss of its investment grade, which would force the ecb not to accept italian bonds as collateral for the provision of liquidity and to stop buying italian government bonds under its pspp. taking into account that qe ends next december, borrowing costs in some euro area countries could surge to more than 5 %, near 2013 levels. the worry then would be that this could perhaps trigger the next eurozone crisis : a

yannis stournaras : present situation and proposals to move forward speech by mr yannis stournaras, governor of the bank of greece, at the conference organized by the hellenic observatory of the london school of economics on “ getting policy knowledge into government ”, london, 19 may 2016. * * * before i begin my presentation i would like to congratulate the hellenic observatory at the lse, professor kevin featherstone and his colleagues, for twenty years of valuable contribution to a better understanding of economic and social realities in greece. the lectures, publications and research work of the observatory allowed us to look at greece through the lens of an outside, independent observer, detached from our everyday entanglements. on this happy occasion of your 20th anniversary i would like to thank the hellenic observatory for that contribution and wish you many more years of creative activity. ladies and gentlemen, dear colleagues, the speakers who took the floor in the preceding panels have covered the european and greek experiences, giving us powerful insights into the respective patterns and methods used. all discussions converged in the assessment that, if governments recognize, accommodate and internalize outside knowledge and technical expertise, the efficiency of policy making mechanism, as well as the quality of the decisions should be greatly improved. this leads directly to the conclusion that, in order to move forward, we must improve and enrich this fruitful relationship, removing existing obstacles. ladies and gentlemen, allow me now to share with you some general thoughts on the subject, based on the greek experience. i will begin by describing briefly the nature and the characteristics of outside knowledge. then i will focus on the supply and sources of knowledge and particularly on the dual position of the bank of greece. finally, i will outline the attitude of greek governments vis a vis external knowledge and their willingness to use it as an input into their decision making, concluding with some remarks on the formative factors shaping this attitude. outside knowledge – technical expertise i understand outside knowledge and expertise as knowledge developed outside the government policy mechanisms. in the long – run one can rightfully advocate that outside knowledge is the cornerstone of economic policies, which are based on theories developed outside politics, in the field of science. but, as we are not here to discuss the perennial question of the relationship of science and politics, i must confine the analysis to the short and medium run. in this time - frame, outside knowledge should be seen firstly as public knowledge, i. e. as the existing corpus of research results