welcome address by bank of greece governor yannis stournaras at a formal dinner in honour of jean - claude juncker, former president of the european commission and former prime minister of luxembourg 18 / 05 / 2022 - speeches on the occasion of his election as honorary member of the academy of athens. it is a great pleasure and privilege for the bank of greece to welcome president jean - claude juncker, on the occasion of his election as honorary member of the academy of athens. we welcome a great european statesman and a great friend of greece. a man who has contributed so much to greece staying in the eurozone in 2012 and 2015, as i have witnessed first - hand in these difficult years, first as minister of finance and then as governor of the bank of greece. a statesman who, during his long years of service in senior government positions both in luxembourg and at european institutions, proved to be one of the staunchest champions of european integration and one of the strongest leaders who handled successfully the crises that the eurozone faced over the last several years. a visionary leader who contributed enormously to the creation of our common currency, the euro, who strongly believed in it since its inception and fought hard to ensure its stability throughout these years. born in luxembourg, a country in the heart of europe, our dearest jean - claude realised at a young age that the future of europe lies in the close cooperation of its member - states and mainly in the gradual integration of national policies and rules. having left his mark on his country ’ s politics, he rose to top positions in the european union and, in this capacity, worked hard on european integration. he is one of the great europeanists, following in the footsteps of helmut kohl and francois mitterrand, with his firm conviction that european integration is the only way forward and that this path is irreversible. president juncker was one of the most consistent and influential advocates that greece could solve its fiscal problems within the eurozone, rather than outside, as some sadly wanted at the time. he strongly resisted the idea that greece should be sacrificed like iphigenia to allow the fleet to sail. this was due not only to his expressed love for greece and its heavy cultural heritage, but mainly to his strong belief in the european values and in the basic principle of keeping the eurozone together. he fervently defended greece ’ s place in the european family, by deeply understanding and recognising the efforts that the

per cent of gdp in 2008. these large and growing imbalances should have sounded warning alarms to the financial markets, but they did not do so for some time. despite relatively low spreads on greek sovereigns following the outbreak of the global financial crisis, as early as in 2008 the bank of greece began warning of the dangers inherent in the twin deficits. bis central bankers ’ speeches outbreak of the crisis these dangers became evident – belatedly – to the financial markets in the fall of 2009 with the news that the fiscal deficit for that year would be much higher than had been earlier projected. interest - rate spreads began a relentless upward climb and the sovereign became cut off from the global financial markets. in may 2010, the government agreed to an adjustment programme with the imf and greece ’ s euro - area partners in order to meet its financing needs. this adjustment programme was built around two key pillars. a. fiscal consolidation b. structural reforms ( including privatizations and measures to combat tax evasion ) the government placed more emphasis on the first and less emphasis on the second pillar. moreover, the fiscal mix relied more on tax increases than on spending cuts. the bank of greece had advised that the mix should include 1 / 3 revenue increases ( mainly through broadening the tax base ) and 2 / 3 spending cuts. fiscal consolidation led to a recession that was deeper than expected, partly because it relied heavily on increases in tax rates and was not combined with structural reforms to boost growth prospects. what had started out as a sovereign debt crisis spilled over to the banking system. prior to the outbreak of the sovereign crisis, the banking sector had sound fundamentals – with high cars, low loan - to - deposit ratios, and essentially no toxic assets of the kind that set - off the 2007 global financial crisis. the size of the banking sector at the outset of the crisis – at 200 % of gdp – was much smaller than in other countries that experienced crises. in contrast to what happened in other countries, in greece it was the sovereign crisis that led to a banking crisis, not the other way around. how did that happen? first, in terms of liquidity. a series of sovereign downgrades, and then bank downgrades, forced the banks out of the global financial markets. uncertainty led to large deposit outflows. banks had to resort to central bank funding, at first through eurosystem monetary policy operations, but gradually, due to the lack of eligible collateral, to emergency liquid