a level playing field. on evaluating the effectiveness and efficiency of macro - prudential tools, i believe the main challenge is to ensure that the regulatory framework remains sufficiently capable of addressing systemic risks. especially in an ever - changing financial sector. this is why we should keep an open mind to developing the framework further. against that background, allow me to highlight some lessons from the last couple of years. first, it is equally important to understand what macro - prudential policy can and cannot do. the current macro - prudential toolkit, at least in the netherlands, is mainly geared toward building bank buffers and resilience. however, the macro - prudential authority 1 / 4 bis - central bankers'speeches should ideally also have sufficient tools at its disposal to limit the cyclical build - up of excessive risks at a much earlier stage. i am thinking here, for example, of borrowerbased measures. of course, that theme interacts with political economy deliberations, a reason why i will not dwell on that any further here. second, the covid pandemic showed us the great value of having sufficient capital buffers that can be released. this capital should supplement a sufficiently large layer of structural buffers, and can be used in response to a shock. thereby giving banks extra room to absorb losses and keep credit flowing. against this background, in the netherlands we decided to revise our framework to target a 2 % countercyclical capital buffer in an environment in which risks are neither subdued nor elevated, known elsewhere as a'positive neutral rate '. this brings me to my third lesson, which is that there is great merit in building buffers early on. after all, by building capital in times when risks are slowly on the rise, when financial conditions are favourable, and when bank profitability is there, we are able to prepare the sector for worse times and avoid difficult situations later on, such as the one in which regulators may want to increase capital requirements but fear the procyclical effects this could bring about. in the same vein, there is merit in taking better account of both the benefits and costs of capital requirements when determining the right policy mix. this consideration is also relevant at this juncture, where profits in the european banking sector are looking rather healthy still, while uncertainty about the future macro - financial environment is on the rise. it is clear that we have come a long way. at the same time, i am

. the dutch and european economy a speech for the dutch media would of course not be complete without some news, but the news i had has been somewhat overtaken by the publication of the latest commission forecasts for the european and dutch economy. our open economy has suffered considerably from the recent worldwide economic downturn. we are also contending with the after - effects of the boom in the late 1990s which eroded our competitiveness. this was a contributory factor in the abrupt reversal in dutch growth from well above the emu average to the lowest in the euro area. but there is light at the end of the tunnel. the american economy is clearly picking up. the crucial question now is whether the euro area, and the netherlands in particular, can benefit from this revival. owing to the poor growth figures in the first two quarters, the netherlands will this year see a significant economic contraction. growth is expected to be more negative than our last projection of – 0. 4 % in the june quarterly bulletin, and will hence be closer to – 1 % than – 0. 5 % over the whole year. according to the latest dnb projections, next year ’ s growth will barely exceed 0. 5 %. despite these setbacks, the nadir of the recession is now behind us. producer confidence has now reached its highest level this year, having shown an increase for four months in a row, while industrial order books and capacity utilization have slightly expanded. although 2004 will still be a year of adjustment, solid foundations will be laid for a sustainable economy recovery. wage moderation and cost - reductions will restore corporate sector competitiveness, renewing growth in business investment for the first time in four years. thanks to this and other factors, growth in 2005 will return to its potential, a potential that will in due course benefit from the range of structural measures now in the pipeline. despite the hesitant start, the economy will hence eventually gain full speed. whereas the economic signals are green, all warning lights in the budgetary area in europe are flashing bright red. three countries have already crashed the red light, with a deficit exceeding the 3 % ceiling under the maastricht treaty. france will do this next year for the third year in succession, and should hence be penalised. the penalty for france could reach 0. 3 % of gdp, representing more than eur 4 billion. however, this fine need only be paid if france fails to narrow its deficit to below the 3 % ceiling within two years