and budget deficits ( like greece on the eve of the crisis ), while member states with high ( compared to the macroeconomic imbalances procedure limits ) current account surpluses could have responded more appropriately. after the crisis, we have seen a home bias in investment and a flow of euro area excess savings towards the rest of the world rather than within the eu ( from higher to lower gdp per capita countries ). this has also led to a reversal of the degree of financial integration and income convergence among the euro area member states. therefore, there is a priority to complete the banking union with a european deposit insurance scheme and the capital markets union in order to restore intra - european financial flows, to improve stability in the banking sector and to promote private risk - sharing in the eu. in this context, the role of the esm could be further enhanced, and among other things, to support banking union with a backstop facility. emu should also enhance public sector risk - sharing by creating a centralised fiscal stabilisation tool. the european investment stabilisation function, once fully and efficiently operative, could 5 / 8 bis central bankers'speeches be transformed into such a tool. other proposals involve a european unemployment insurance scheme and the issuance of european “ safe ” bonds. these proposals deserve our attention. as regards member states, national ownership and credible implementation of country - specific recommendations is crucial both for promoting economic policy coordination and for risk reduction. therefore, national policies should focus on : a ) structural reforms aimed to improve the flexibility of domestic markets and to reduce vulnerabilities in the financial sector in order to facilitate the adjustment of the economies to future shocks ; and b ) sound pro - growth fiscal policies that allow for stabilisation over the business cycle and, at the same time, ensure debt sustainability. 6. conclusions and policy lessons in conclusion, the main policy messages from the greek crisis are the following : • delaying the needed adjustment only magnifies the problem, which will then have to be addressed later on less favourable terms. • the proper sequencing of the reform programme as well as ownership mainly by the government but also the main opposition parties, is key to its success. • greater risk - sharing in the euro area to address large asymmetric shocks and political solidarity in the eu to help countries in difficulty rather than pointing the finger at them ( which in fact propagates populist voices in both camps ) are of utmost importance in order to ensure the success of

to the banking system ; even though i remain on the optimistic side about the medium - term prospects, i am afraid that the scars from the pandemic will be more visible in 2021. the loan moratoria and the fiscal support measures averted the massive defaults of borrowers during 2020. inevitably, new defaults will arise at some point within 2021 and will affect asset quality and profitability of european lenders, particularly so as support measures will be gradually lifted. note that the burden from new covid - 19 related defaults will be higher for banks that already had a high stock of npls such as greek banks, where a big chunk ( if not all ) of the existing buffers was meant to be used to address part of their legacy npls. another point i would like to make here is the significant role of the banking system in avoiding the creation of ‘ zombie ’ companies and permanent ( structural ) scars to the economy. banks should act decisively and address new delinquencies at a cost for their capital. npl servicers will also have an important role here, as moving npls outside the banking sector does not imply that credit risk is removed away from the financial system. only the effective workout of these loans will essentially remove the burden to obligors and reduce the credit risk, eventually allowing a better allocation of resources in the economy. as banks come out from a very tough year and have to cope with the existing and the new challenges we discussed earlier, they need to have a credible plan about the next day and need to boost their resilience. i believe that further consolidation will occur in 2021 and 2022. european banks have currently a gap compared to their us peers, both in terms of efficiency ( return on equity ) and valuation ( price - to - book ). the pandemic may amplify existing vulnerabilities of european banks and widen further this gap. consolidation ( either at national level or crossborder ) is not a panacea but could certainly be supportive, especially on the cost effectiveness. another significant development in 2021 is digitalization. the pandemic has changed not only the way we work and socialize, but also our relationship with banks. it is a catalyst for digitalization and is pushing banks to invest more in digital infrastructure. this trend will shape the competition landscape and will probably drive the laggards off the market in the medium - term. climate change will gain more importance in 2021 and