halfway house ’, a monetary union needs a banking union. today we face another crisis. and over the last six months, we have seen the european project deliver. fiscal, monetary and financial sector policies were deployed when faced with this common challenge. but while the financial system withstood the initial effects of the pandemic, and we are now seeing a gradual economic recovery, the resilience of the financial system and indeed europe ’ s resilience may be tested further. today i will : - first discuss the european wide macroeconomic stabilisation policies that were deployed in response to the pandemic ; - second, i will turn to common financial stability concerns ; - third, i will briefly consider the departure of our nearest neighbour from the eu ; and, - finally i will conclude with some thoughts on how we can be influential in europe, from the central bank ’ s perspective. macroeconomic stabilisation – a common goal macroeconomic stabilisation has been key to mitigating the effects of the current crisis on individuals, households and firms. by macroeconomic stabilisation, i mean actions that policymakers take to counter the effects of economic shocks. for ireland, as a small open economy on the periphery of europe, particularly vulnerable to https : / / www. centralbank. ie / news / article / speech - irelands - engagement - in - europe - 1 - oct - 20 1 / 5 02 / 10 / 2020 ireland ’ s engagement in europe and deeper integration of europe - deputy governor sharon donnery global shocks, being part of the single market has been critical to our growth and prosperity in recent decades. and our resilience to shocks would likely have been weaker, absent the common market, currency and policy actions of europe behind us. the policies and decisions we make engaging with our colleagues at various tables in europe are central to this. following the harsh lessons of the last crisis, the european response to the pandemic has been sizeable and significant. in contrast to the last crisis, counter - cyclical fiscal policy has played a huge role in supporting households and firms through the pandemic. at an eu level, the “ general escape clause ” of the stability and growth pact ( sgp ) – europe ’ s fiscal framework – was activated. this enables countries to borrow heavily to finance the rising costs of the pandemic. the activation decision was made by the ecofin council, made up of the economics and finance ministers of all member

businesses to access a wider range of funding sources. savers and investors can also benefit from greater choice. developing cmu can become another instance of how we are stronger together. cmu will also help, as isabel schnabel emphasised recently, to accelerate the transition towards a carbonneutral economy, as the evidence suggests that stock markets are more effective than banks in financing the greening of our economy. 13 however, like all forms of financial intermediation, market - based finance can contribute to a build - up of financial vulnerabilities. vulnerabilities linked to market - based finance include those related to liquidity mismatches and excessive leverage. given the size of the sector domiciled here, we actively contribute to discussions through our role in the eurosystem, the european system of financial supervision and we are also active at the global level through contributions to deliberations by iosco and the financial stability board. the shock from covid - 19 resulted in stress across global financial markets. parts of the global funds sector – including funds resident in ireland – experienced a sharp increase in redemptions and challenges in liquidity management. our most recent financial stability review, published in june, showed that there were around €72bn of net redemptions from irish - resident funds in march. at an individual level, the vast majority of funds managed to meet investor redemption requests, with limited use of tools such as suspensions and gating observed. however, this needs to be seen in the context of unprecedented central bank interventions that played a key role in restoring market functioning. https : / / www. centralbank. ie / news / article / speech - irelands - engagement - in - europe - 1 - oct - 20 3 / 5 02 / 10 / 2020 ireland ’ s engagement in europe and deeper integration of europe - deputy governor sharon donnery and the focus is now on the extent to which structural vulnerabilities from liquidity mismatches and leverage in the global funds sector contributed to market disruption. as regulators, we must ensure that the level of resilience in market - based finance is great enough to match its increased importance in the financial system and the broader economy. the central bank is actively engaged with international stakeholders on identifying risks in the sector as well as making the case for, and contributing to the development of a macroprudential framework for the market - based finance sector. 14 as we work towards cmu in europe to enhance