suggest that the debt intolerance thresholds are state and country dependent. however, if this threshold is reached, countries immediately lose market confidence, face rising borrowing costs and explosive debt dynamics and consequently fiscal policy destabilizes ( instead of stabilizing ) the economy. as has been shown e. g., by the oecd, for higher - income countries, the debt threshold ranges from 70 to 90 % of gdp, while for emerging economies the debt threshold is even lower at 30 to 50 % debt of gdp, as they are exposed to capital flow reversals. hence, countries facing fiscal challenges should design credible multiannual fiscal consolidation programmes, whose objectives should be clearly and openly communicated to the public. however, governments which apply austerity programs loose political capital. this is because fiscal consolidations hurt growth and deepen the recession, hence reducing living standards. recent evidence and international research have shown that governments are more likely to succeed and maintain the support of the population when consolidations are introduced in the aftermath of an election, and when the party in office has a clear and strong mandate to reform. therefore, governments with fresh political capital like the current one in greece have a better chance in succeeding. at the same time fiscal consolidation programs should aim at increasing the efficiency and effectiveness of spending ( e. g., health and education spending and spending on social policies ) and eliminating distortions in taxation ( broaden the tax base, cut expenditures rather than increase labour taxes, and increase property and environmental taxes ). the use of certain fiscal instruments could have beneficial effects on equity leading to fairburden sharing and maintaining the support of the electorate. for example, • better targeting social benefits could have beneficial effects on equity. • increases in effective retirement age would improve equity and lower inequality. bis central bankers ’ speeches • the reduction in tax exemption and tax credits will broaden the tax base and along with a more progressive income tax scale will exert a positive effect on equity and lower inequality. • higher wealth and property taxes, if based on a progressive scale, will also lower inequality. finally, it is essential to improve the institutional setting by improving budgetary procedures, introducing fiscal rules and independent fiscal councils and improving medium term fiscal planning. all these actions will enhance transparency, improve accountability and fiscal planning and will contribute to better spending control and improve the probability of successful fiscal consolidation. a better exploitation of government fixed assets through a targeted privatization programme and the adoption of growth promoting structural reforms will

yannis stournaras : “ european banking supervision : the first eighteen months ” welcome address by mr yannis stournaras, governor of the bank of greece, at the presentation of the book by dirk schoenmaker and nicolas veron : “ european banking supervision : the first eighteen months ”, athens, 14 july 2016. * * * we are really pleased and honored to have you here for the presentation of the study related to the first eighteen months of the european banking supervision. i strongly believe your work brings valuable insight in an era involving new policy regimes that have brought forward profound change to the european banking landscape. i also feel the work presented here today is essential as it provides an excellent overview related to ssm ’ s operations as well as the response to several challenges. needless to say if we were having this discussion a couple of years ago it would have been hard to anticipate that a major organization of this size would be fully operational at such an early stage and truly competent in dealing with major issues in the euro - area. it is equally important to understand that these challenges have not changed much over the past few years : asset quality deterioration, market segmentation and business model viability are still issues to be tackled by monetary policy and supervisory decision makers in our days. it is worthwhile examining a persistent characteristic during these years, indicative of these considerations : shares of european banks have been trading at a discount to tangible book value, while those of the largest us banks trade at a premium to book value. a comparison of capital - adequacy ratios can no longer explain this difference in valuation multiples, as capital ratios for euro area banks have risen from about 8 percent in 2008 to about 14 percent today. on the contrary, they are indicative of a european banking sector undergoing a transformation that demands a comprehensive and radical adjustment of the core business model of operation. i feel that, eight years after the financial crisis, we are still witnessing a transition phase. banks are definitely stronger than one decade ago, capital adequacy ratios do demonstrate that, but they are still adjusting their business models to a post - crisis world. at the same time, they also have to address legacy issues with problems of non - performing exposures adding to the overall assessment of investment considerations. the euro - area financial crisis, as originated in the end of the previous decade, provided the perhaps most serious challenge to the stability of the european union ; it is now well understood that a