16. 11. 2018 remarks - first panel : “ central banks, macroeconomic stability and economic growth ” banco de espana and european institute of the mediterranean with the support of the central bank of tunisia pablo hernandez de cos governor in this first session of the conference we will focus on the role of central banks on both shores of the mediterranean in contributing to the achievement of sustainable growth in the long term. before giving the floor to our distinguished speakers, let me say a few words about the current global outlook and their implications for economic policymaking. at present, the global economy seems to be approaching its cyclical peak while the process of monetary policy normalization in the advanced economies continues, particularly in the united states. this process should normally precede the tightening of global financial conditions. at the same time, tensions in international trade remain, with the risk that disputes in this area will be solved with a greater use of protectionism to the detriment of a multilateral approach to the resolution of these conflicts ; and, elsewhere, the markets of some emerging economies that had significant macroeconomic imbalances have undergone episodes of severe turbulence. we are therefore facing a phase of growth moderation with limited scope for economic policies. it would seem necessary to harness the current moment in which growth records are still satisfactory in order to generate margins that allow a certain countercyclical gearing of economic policies in the future. in the fiscal area, the post - crisis recovery has not been accompanied in a significant number of countries, advanced and emerging alike, by a sufficient reduction of structural deficits in public accounts and the halting of the process of rising public debt. more generally, in many cases it may be necessary to move forward with fiscal reforms that seek to reduce the distortions to growth while allowing the most vulnerable sectors of society to be supported more decisively. the limited fiscal space available is exacerbated in the longer run in many economies, principally but not exclusively the advanced countries, owing to the adverse demographic prospects. ageing populations pose significant challenges for public finances, as they bear on both the revenue and the expenditure sides. on the expenditure side, ageing will considerably affect pension and healthcare spending which, in many cases, will require rethinking pension systems to guarantee their sustainability. on the revenue side ageing leads to changes in the composition of tax bases as it does to lower labour income shares, to capital deepening and to changes in the composition of consumption. in the area of monetary

of indebtedness is essential for an economy to grow fast enough so as to reach its potential through a sustainable level of consumption, investment and production, that are financed by borrowing. as the world bank indicates, " debt financing is critical for development, but unsustainable levels harm growth and the poor. debt can be a useful tool if it is transparent, well - managed, and used in the context of a credible growth policy. but, too often, this is not the case. high public debt can inhibit private investment, increase fiscal pressure, reduce social spending, and limit governments'ability to implement reforms ". 1 / 5 bis - central bankers'speeches recent imf research shows that the post - pandemic drag on growth could be much larger in countries where ( 1 ) indebtedness is more concentrated among financially stretched households and vulnerable firms, ( 2 ) fiscal space is limited, ( 3 ) the insolvency regime is inefficient, and ( 4 ) monetary policy needs to be tightened rapidly. it is not easy however to scientifically define the level of the debt threshold above which debt is inducing crowding out effects. for the case of private debt, different researchers quote different debt - to - gdp levels beyond which debt is considered to become unsustainable. this threshold ambiguity also holds for public debt, particularly given the fact that the public or private debt to gdp ratio is by itself an insufficient measure of debt sustainability. for example, it makes little sense to compare debt - to - gdp ratios for countries that have very different financial systems, economies, budget constraints and level of development. because of all these differences, rising levels of debt are likely to affect the subsequent performance of each economy in a different way. the imf's debt sustainability analysis for example and its many parameters of identifying potential risks for public debt, reflects this complication. so, there is no easy or simple answer to this question, but a common conclusion provided by many papers in the literature shows that the debt threshold for both private and public debt should generally be different across countries. also, countries with more severe structural issues can handle less debt distress. the risks associated with excessive debt burdens are more prominent now, following the consecutive supply side shocks – the covid pandemic and the war in ukraine. specifically, the measures taken to mitigate the effects of the pandemic to the economy resulted in an increase in both public and private debt around the