to this crisis. in spite of the considerable challenges facing the portuguese economy and society, the progress achieved with the implementation of this strategy is already clearly visible today, particularly in the correction of the external imbalance. need for measures at european level to enhance the growth potential of the economy compliance by a euro area country with the adjustment programme is a necessary though insufficient condition to ensure the success of the adjustment process. in fact, the ongoing adjustment effort at national level needs to be complemented by initiatives at european level that enhance its effectiveness. this means that the credibility of the ongoing adjustment programmes must be validated and sustained by the european context : first, through the adequacy and quality of the rules and bis central bankers ’ speeches institutions which frame and govern the euro area and each of its parts, thereby annulling the perception of a risk of fragmentation and of moral hazard ; second, through mechanisms to ensure liquidity ( which mitigate the risk arising from asymmetric shocks ), mechanisms to monitor / encourage structural reforms ( which, by nature, yield medium term results ), and mechanisms to safeguard the stability of the financial system ; last but not least, through an effective and ex ante practice of cooperation and coordination of the macroeconomic policies of euro area countries to ensure the stability and growth of both the whole and each member state. in the short term, the euro area needs to have instruments to respond quickly and effectively to financial stability problems. important steps were taken in this regard with the creation of the european financial stability facility and then the european stability mechanism. in addition, the process of coordination of economic policies at european level must be strengthened and improved. the main concern should be to ensure that national policies complement each other. in particular, it is important that the fiscal consolidation path of each member state takes into account its room for manoeuvre in order to make the process more stable as a whole. it is also desirable to implement investment projects at european level with a proven impact on potential output, for example in energy and telecommunications. these projects are expected to contribute to a more integrated, efficient and competitive economy taking full advantage of the benefits of the european single market. the new european institutional architecture building a new european institutional architecture rests on four pillars : banking union, fiscal union, economic union and the strengthening of democratic legitimacy and accountability. we must ensure that the construction of each one of these pillars is progressing well and in an articulate manner. we must also ensure that the materials used

single currency area comprising 16 countries and 330 million citizens. in addition, the ecb has been successful with its reliable policies in anchoring future inflation expectations in line with the definition of price stability. this is another of its achievements. citizens and financial market agents consider the ecb ’ s stability target to be a credible one, and continued to do so even during the difficult conditions of the financial crisis. fixing a quantitative definition of price stability was a key factor that contributed to the solid anchoring of inflation expectations. the definition was useful both in times of increased inflationary pressure – not least in the first half of 2008 when oil prices were high – and in times when risks of deflationary developments were being discussed by the markets – as occurred during the peak of the financial crisis in autumn 2008. the current financial crisis represents a break not experienced in the world economy since world war ii. the challenges posed by the crisis are immense, and in many areas we are still at the beginning of implementing the unavoidable and necessary changes. it is now clear to all actors that, in a globalised world, mistakes at the individual level – for example, unsustainable business models of certain large banks – can very quickly amplify into developments at the aggregate level that lead to dangerous imbalances across the entire system. this holds all the more if there are already marked imbalances within the system at the outset, such as in the current accounts of important economies. it was thanks only to the extremely speedy, comprehensive and well - coordinated monetary and fiscal policy interventions that, in autumn 2008, panic on the markets was held at bay and that a widespread stabilisation was subsequently achieved. in europe, in particular, the crisis management proved to be effective. this should not be forgotten when drawing all the necessary lessons from the crisis, not only globally, but also at the european level and within the individual member states of the euro area. at the international level – within the g20 and supported, in particular, by the financial stability board – there is agreement that the global financial system must be made much more resilient and less susceptible to risk. in the eu, cooperation between national supervisory authorities will be improved through the creation of a european system for financial supervision. in addition, a european systemic risk board ( esrb ) is being established, which will issue early warnings and recommendations in order to prevent risks from arising that threaten the financial system as a whole. the ecb will provide