productive use of programmes for the co - financing of loans and guarantees with resources from eu structural funds and the european investment bank. • the active role of the banking system in the restructuring of businesses and sectors, with specific actions to support truly viable businesses and to encourage initiatives that promote bold sectoral restructuring. by adopting such a stance, banks could speed up the transition to the new growth model that greece so urgently needs. bis central bankers ’ speeches the challenges and role of the banking system today as the only sector to have undergone such radical restructuring, the banking system today is well - positioned to play an active role and spearhead the restructuring of the business sector. what the banks have learned from experience can be equally valuable for businesses in other sectors. the banks should therefore see it as their duty to make an essential contribution to the transformation of production along the lines of the new sustainable growth model. to this end, bank strategy must be reoriented so as to avoid a recurrence of the trends of the previous decade, when credit was largely used for residential investment and consumption. new credit must now go to dynamic outward - looking enterprises with growth prospects. in other words, the limited liquidity available should be channelled into the real economy in a way that maximises its growth potential. it is pointless, and even dangerous, to let weak, non - viable businesses and saturated sectors to continue operating as usual. more reforms now in order to turn stabilisation into dynamic growth after a protracted period of deep recession, the greek economy is showing signs of recovery. we now face the challenge of turning the incipient signs of stabilisation into dynamic growth built on solid foundations. this, today, is the main item on the national agenda, the only way to ensure that the sacrifices of the past years will not have been in vain. the front - runners in this effort will be dynamic firms that shift their activities to new products and markets, generating a virtuous circle of growth. economic policy can and has to facilitate this effort. the banking system must also lead the way by effectively supporting the restructuring of the business sector. the greek economy, after years of complacency, during which the twin deficits and debts rose to unsustainable levels, ultimately culminating in a crisis of unprecedented scale and depth, is now stabilising. the country has come a long way in terms of adjustment. however, the effort has not yet been completed. now that we have succeeded in

and investment. before the pandemic – i need to remind you – we had agreed that the equilibrium real interest rate was zero or even negative. has this changed? what are the fundamental forces that could have produced such a change? personally, i am not convinced at all that the deflationary tendency that we witnessed for a number of several years in the euro area before the pandemic has now turned into an inflationary one. as i mentioned earlier, the inflation surprise that we have recently observed has to do with supply - side shocks. fourth, on the relationship between the growth rate of money supply and inflation : αs we all know, this relationship is not stable ; it has broken down in the past. have you noticed for instance that, despite the very high growth of money supply recently, inflation expectations have stayed anchored at below 2 %? this is extremely important. having said that, i can also tell you that i do not belong to this school of economists that totally ignore money supply. i actually believe that the economy is being governed by aggregate demand and aggregate supply forces and money is part of the aggregate demand forces. however, under certain circumstances, money does not matter, in the sense that it cannot affect economic variables. keynes for instance had talked about the “ liquidity trap ”. in addition, we know from various variations, old or new, of the mundell – fleming model, that there are conditions under which money supply does not matter. so let ’ s not be dogmatic either way. there is no doubt that in the long - term inflation is a monetary phenomenon, but the “ long term ” might actually be too long! fifth, we should not forget that monetary tightening in the eurozone will start in june, with the likely repayments of tltros. finally, i want to reassure you once again that we will do “ whatever it takes ” to safeguard price stability. 2 / 2 bis central bankers'speeches