of countries. the commission should have greater responsibility by making proposals, which can only be modified with unanimity in the council, rather than mere recommendations under the stability and growth pact. in the event of non - compliance, sanctions need to be applied much earlier and to be broader in scope. they should not only address excessive debt ratios, but also apply when countries are not making sufficient progress towards medium - term budgetary objectives. a wider spectrum of financial sanctions needs to be considered, along with non - financial and procedural sanctions, such as more stringent reporting requirements or even a limitation or suspension of voting rights. the second area may appear more novel, both at the level of the european union and at the level of the euro area, but the ecb has in fact been stressing it in the eurogroup since at least 2005 : the surveillance of policies to maintain europe ’ s internal and external competitiveness – policies to raise productivity, to enhance people ’ s skills and to improve firms ’ competitiveness. these policies go well beyond the tradable sector. they must also encompass the non - tradable sector, including the public sector, since it too is decisive for the competitiveness of an economy as a whole. conscious management of wages and costs in order to maintain a healthy position for the economy within a competitive environment – this should be the core focus of such broader macroeconomic surveillance. the reason why competitiveness should be the main focus is not that countries should pursue export - oriented policies or boost international market share. the reason is that within a monetary union, the relative competitiveness of economies captures very well the sustainability of price and cost developments. i am pleased that last thursday ’ s european council confirmed the need for an effective surveillance framework in this area. experience has shown that persistent divergence in this regard is detrimental both for member states and for monetary union as a whole. as with fiscal surveillance, this framework needs to allow for targeted and differentiated surveillance and follow - up measures. for countries that experience significant losses of competitiveness, surveillance should become increasingly deep and detailed. more ad hoc reporting and dedicated country missions, policy recommendations, compliance requirements, public peer pressure and gradual financial steps to encourage compliance could all be part of that process. for this to work, we need a transparent and effective trigger mechanism to determine the intensity of vulnerabilities and surveillance. this should be based on close monitoring and reporting by both the commission and the ecb. experts are currently developing ways to best

. remember that lockdowns are a non - economic shock that affects productive and unproductive firms indiscriminately. policies that protect viable businesses until activity can return to normal will help our productive capacity, not harm it. the right policy mix is essential. fiscal policy has to remain at the centre of the stabilisation effort – the draft budgetary plans suggest that fiscal support next year will be significant and broadly similar to this year, and the next generation eu package should become operational without delay. supervisory authorities are working to ensure that banks can continue to support the recovery by readying them for a potential deterioration in asset quality. 10 and structural policies have to be stepped up so that policy support can accompany the wide - ranging changes that the pandemic will bring, such as an accelerating spread of digitalisation and a renewed focus on climate issues. 11 the outlook for monetary policy so what is the role of monetary policy in this response? it is clear that downside risks to the economy have increased. the impact of the pandemic is now likely to continue to weigh on economic activity well into 2021. moreover, demand weakness and economic slack are weighing on inflation, which is expected to remain in negative territory for longer than previously thought. this is partially due to temporary factors, but the fall in measures of underlying inflation also appears to be connected to the weakening of activity. and developments in the exchange rate may have a negative impact on the path of inflation. continued policy support is therefore necessary to achieve our inflation aim. but we should also consider how best to provide that support. the unusual nature of the recession and the unsteadiness of the recovery make assessing the inflation path harder than in normal times. shifts in consumption baskets caused by supply - side restrictions are creating significant noise in the inflation data. 12 and the stop - start nature of the recovery means the short - term path of inflation is surrounded by considerable uncertainty. in these conditions, it is vital that monetary policy underpins inflation dynamics by supporting demand and preventing second - round effects, where the negative pandemic shock to inflation feeds into wage and price - setting and becomes persistent. to that end, the best contribution monetary policy can make is to ensure favourable financing conditions for the whole economy. 4 / 6 bis central bankers'speeches two considerations are important here. first, while fiscal policy is active in supporting the economy, monetary policy has to minimise any “ crowding - out ” effects that might create negative spillovers for