the current framework, including the structural balance rule, the 1 / 20th debt rule, the expenditure benchmark and the use of ‘ medium term objectives ’. net primary expenditure – which excludes interest payments and cyclical unemployment spending, and is adjusted for discretionary revenue measures – is envisaged as the single operational indicator for setting the fiscal adjustment path and carrying out annual fiscal surveillance. debt reduction plans would be country - specific, taking national circumstances into account. at the same time, the 3 and 60 per cent of gdp reference values for the deficit and debt outlined in the european treaty would remain a central part of the fiscal architecture, as would the excessive deficit procedure, but with an improved and more credible enforcement mechanism, and a greater engagement of the independent fiscal institutions. i believe that this proposal goes in the right direction. the greater flexibility envisaged would allow for a more active role to be played by fiscal policy to counter the economic cycle, in addition to that usually played by automatic fiscal stabilisers. this reinforces national ownership of counter - cyclical policies, and strengthens accountability. this is a welcome development for the interaction between monetary and fiscal policy, given the limitations that countercyclical monetary policy faces when rates are constrained by the effective lower bound. it will more easily allow other policy makers to do their part where needed. naturally, i also welcome the more forward - looking ‘ medium - term ’ focus for economic governance. i think this is an essential ingredient for addressing the intergenerational macroeconomic challenges i mentioned earlier. in addition, the greater transparency and credibility of a reformed fiscal framework and its improved enforcement mechanism should provide for a more solid anchor for public debt sustainability, assuming that the new framework is implemented effectively and there is buy - in from member states. operating in a stronger institutional framework could help clarify the proportionality of monetary policy measures and improve the trade - offs that the ecb faces. 17 a simplified and more transparent framework – with increased national ownership and where all relevant actors are called to play their part – would also increase accountability through public scrutiny, enabling an increased public trust in the national and european institutions. the resulting strengthened institutional framework, by allowing greater public participation, should support the strengthening of social capital. persistently high inflation erodes economic capital we live in a very different world than that of the 1980s, but the case for central bank independence remains, in my view, as strong as ever. but, at the same time, independence is not

important, a more active monitoring from the people we serve will also reduce the risk of complacency creeping in. in fact, being ‘ trusted by the public ’ is one of the five indicators we track to assess whether or not our current strategy is making a positive difference to the wellbeing of our citizens. 24 specifically, we have decided that achieving a ‘ 75 per cent trust score ’ is one of the key indicators for measuring the impact of our strategic plan. conclusion let me conclude. the central bank ’ s founding legislation states that our constant and predominant aim shall be the welfare of the people as a whole. we and other central banks need trust to succeed. trust is stronger where social capital is strong, central banks can help to build social capital through their actions. for my part, my vision is that of an engaged, open and connected central bank. we need to communicate continuously and transparently with active and increasingly - involved citizens. we have a role to contribute to the building of social capital and also perhaps, as minouche shafik has argued, the creation of a new social contract which strengthens the architecture of opportunity in our community. 25 it will require, i suggest, for those of us working in the world of central banking and also teaching in the world of economics to invest in more integrated, more multi - disciplinary and more longer - term thinking. in short it will require us to give our macroeconomic frameworks a greater intergenerational focus and as a result strengthen and grow our economic capital. acknowledgments : i would like to thank giuseppe corbisiero and reamonn lyndon for their assistance with this speech. [ 1 ] see makhlouf ( march, 2018 ) “ natural capital and the living standards framework ” for my views on natural capital and why it matters for wellbeing. [ 2 ] for more on “ climate change and the strategy review ”, see the ecb strategy review webpage. [ 3 ] see biden - harris administration ( january, 2023 ) “ national strategy to develop statistics for environmental economic decisions ”. [ 4 ] makhlouf, gabriel. “ social capital and the living standards framework ”. address to university of auckland ( 27 march 2018 ). [ 5 ] the world bank assigns social capital concepts to three broad groups. ‘ horizontal associations ’ refers to social networks, organisations or groups in society that facilitate coordination and cooperation. ‘ vertical associations ’ are ties that link