the financial and economic turmoil, in particular after the lehman insolvency. however, this was the case in most member states, and so the reasons why only some of them suffered a serious loss of market participants ’ confidence in their capacity to bear the debt burden lie further in the past : in these countries, fiscal and economic policy omissions in the years before the crisis led to an accumulation of explicit or implicit liabilities in the state ’ s budget and a significant loss of competitiveness. consequently, the driving forces behind the increase in perceived sovereign risk were not speculative forces on the financial markets but poor fundamentals. when the loss of confidence culminated for the first time in may, comprehensive support measures for greece – where the situation was particularly dire – were taken to avoid risks for the stability of the euro area as a whole. financial support was tied to a tough, closely monitored adjustment programme aimed at restoring the sustainability of public finances in greece. in addition, a rescue scheme financed by the imf, the european union and its member states was set up to deal with future intensifications of the crisis. again, financial support is granted only if a member state undergoes a tough adjustment programme that secures public solvency. this conditionality is crucial : financial support can buy some time, but confidence in the sustainability of public finances will only return if substantial structural improvements in the respective countries – be it in greece or in ireland, which called for support from the efsf, efsm and imf in november after the fiscal burdens related to supporting its oversized financial sector became overwhelming. for the financial system ’ s future stability and effectiveness, it is indispensable to ensure that confidence in the stability of public finances remains intact. to achieve this, not only a credible consolidation of public finances is needed but also improvements in economic governance in emu that ensure prudent fiscal policies in the medium to long run. against this background, the current discussion about – and even calls for – euro bonds must be viewed critically. euro bonds would render all euro - area countries jointly and severally liable, thereby eroding each state ’ s own fiscal responsibility. the incentive for consolidating public finances would be reduced, along with the credibility of and confidence in the state ’ s ability to service its debt – which is certainly the opposite of what is needed. 5. conclusion ladies and gentlemen, although the financial sector has been at the heart of the crisis, the third phase

nicholas c garganas : the greek experience speech by mr nicholas c garganas, governor of the bank of greece, at the economist conference on " social security reform in greece ", athens, 14 february 2008. * * * i would like to thank the organisers of the economist conference on " social security reform in greece " for their invitation and for this opportunity to speak on the subject of the implications of ageing populations – a subject of great importance for many countries, especially for greece. a main accomplishment of social policies in the second half of the last century – at least in the case of advanced countries – is that being old is no longer considered synonymous with a low quality of life. that accomplishment has been made possible through the provision of public pensions. in greece, of course, a significant proportion of pensions are still very low, but this can be considered a consequence of inefficiencies and weaknesses in the social security system as it stands at present. yet, as europe ’ s population ages, a demographic shift will take place in the next forty to fifty years that will pose significant challenges to the pension systems of our countries. the ageing of society will make it increasingly difficult to maintain an adequate level of public pensions for our older citizens. to provide an idea of the demographic changes that are expected to take place in the next forty to fifty years, consider the following projections with respect to greece, issued by the european union ’ s economic policy committee. these projections cover the period from 2005 to 2050. • projection number 1 : here is some good news – people will live longer, so that the population comprised of ages 65 or above will increase by some 60 per cent. • projection number 2 : low fertility rates will contribute to a decline of some 20 per cent in the working - age population, defined as ages 15 to 64. • putting these two projections together means that the ratio of the elderly population to the working age population – what is known as the old - age dependency ratio – is expected to more than double between 2005 and 2050, reaching more than 60 per cent. this would mean that while there are currently more than three workers for each pensioner, in 2050 there would be only 1. 6 workers per pensioner. thus, greece, like many other european countries, will be confronted with a sharp rise in the old age dependency ratio. this situation, in and of itself, however, need not put pressure on the financing of the country ’ s