the criteria, which are specified in quantitative terms in annex iii of the new version of the treaty ( article 14 ). those countries which, despite having sound economic fundamentals, do not meet all the criteria set out in annex iii, will be able to have recourse to the eccl, which would continue to require the signing of a memorandum of understanding. collective action clauses. – the reform to the treaty envisages introducing − from 2022 − an amendment to the current collective action clauses that, if a country decides to proceed with a debt restructuring, a single vote by government security holders would be sufficient to amend the terms and conditions of all the bonds ( ‘ single limb ’ cacs ), instead of dual votes ( one for each issuance and one for the bonds as a whole ; see recital 11 and article 12. 4 ). this amendment is designed to make any debt restructuring more orderly, thereby reducing the costs linked to the uncertainty over how it will be done and how long it will take. as already happened following the introduction of the current cacs in 2013, this amendment − which does not increase the likelihood of a default but reduces the uncertainty surrounding its outcome − could lead to a fall in sovereign debt risk premiums. 4 there is no amendment to the reference in the current treaty to private sector involvement, which remains strictly limited to exceptional cases and is in no way a precondition for obtaining financial assistance from the esm ( recital 12b of the reform proposal ). it is in light of the psi being confirmed as an exceptional case that we should interpret both the amendments to the collective action clauses and the possibility that the reform gives to the esm to facilitate dialogue between a country and private investors, only if the country so requests, ‘ on a voluntary, informal, non - binding, temporary and confidential basis ’ ( recital 12 ). to conclude this discussion of the amendments that the reform intends to make to financial assistance procedures, i would like to point out that a country with high public debt, especially a country with great economic weight in the euro area, must first of all create a situation in which there is no need to turn to the esm ; how to obtain funding is not irrelevant but should not be the focal point. the way forward is to reduce the debt - to - gdp ratio by maintaining an adequate primary surplus, increasing economic growth, and keeping confidence high and the average cost of debt low. the existence of the esm makes this last task

that low public debts and deficits do not guarantee fiscal sustainability. in a crisis, private liabilities can quickly turn into public debt. before the crisis, the fiscal performance of ireland was considered extremely successful. from the launch of emu, it almost halved its debt - to - gdp ratio, reducing it to 25 per cent in 2007. the recession more than doubled it. furthermore, households and non - financial firms were highly indebted ( their debt burden was about two and a half times gdp ) ; the major irish banks had balance sheet assets equal to five times gdp. the fall in real estate prices and the recession caused them big credit losses ; the political decision to use public funds to bail out reckless financial institutions has pushed up the public debt by more than 20 percentage points of gdp so far, to a level of about 95 per cent of gdp in 2010, with further disbursements anticipated for this year following the results of the stress tests conducted on banks. perhaps, the crisis would have been less severe if a framework to detect and tackle macroeconomic imbalances and systemic risks had been in place. this has prompted the introduction of a second pillar in eu economic governance : macroeconomic surveillance. but there is a need for a third pillar : market discipline. i will not focus on the temporary arrangements devised to cope with the significant short - run challenges posed by the crisis. rather, i would like to offer some remarks on the long - term institutional set - up that is currently taking shape in the european union. during the early stages of the debate on the new european architecture, there was relatively little emphasis on the role that markets can bis central bankers ’ speeches play to induce fiscal discipline. the issue gained prominence in november 2010, when the main characteristics of the european stability mechanism ( esm ), the permanent mechanism slated to replace the european financial stability facility ( efsf ) in june 2013, were spelled out. scepticism on the effectiveness of market - based fiscal discipline was already present in the early stages of the emu project. the final report of the delors committee remarked in 1989 that : “ the constraints imposed by market forces might either be too slow and weak or too sudden and disruptive ”. the european commission expressed similar concerns a year later. and many years earlier, luigi einaudi, the great italian economist and statesman, summed up the common view by saying “ i risparmiatori hanno cuore di coniglio, ga