2018, debt sustainability and whether debt measures will be needed. the mission chiefs are back in athens. the priority this week is to agree on contingency measures, which i see as an insurance in the event that the imf fiscal scenario, which is more conservative than the european one, materialises. it ’ s not surprising that there are different views, as there is so much uncertainty. at this point it ’ s a discussion about risk management and how to hedge against risk. these are measures, if the scenario of the commission, the ecb and the esm is the right one, that greece will never have to implement. on debt, the uncertainty is even greater, as we are talking about what happens after 2018 and in the longer term. the debt sustainability analysis will hinge on assumptions about long - term growth, primary surpluses, and interest rates. on this basis, i expect debt measures to be needed to address risks to debt sustainability. when will this go back to the eurogroup? as soon as possible, as there is a value in not waiting too long. the greek economy has the potential to rebound when depositors bring their money back to the banks and banks can again lend to the economy, and when foreign investors come back. but of course all of this assumes that the greek government delivers the agreed reforms. the greek banks are still receiving massive support from emergency liquidity assistance ( ela ) … they are now in a solid capital position, having been recapitalised. the main issues are access to liquidity, which depends on overall confidence in the greek economy, and a high level of non - performing loans ( npls ), which should be addressed in a decisive manner. on monetary policy, you claim that your measures have been a success. but eventually that will be measured on your results on inflation. inflation is at zero and inflation expectations are at a low. the markets don ’ t seem to trust the ecb this is not a question of trust in the ecb. we are in a unique situation in terms of inflation. we have a combination of strong disinflationary forces, which are the legacy of the crisis ( namely : high public and private debt, non - performing exposures of banks, high unemployment and, in general, vast unutilised capacity in the economy ), and a series of negative external shocks, especially lower commodity prices, all of which explain why inflation is very low and increasing only gradually. but

as in the most recent years, it was wrongly distributed across countries. countries with fiscal space were not using it and those without fiscal space were trying to invent some. as a result, monetary policy had to pick up the slack, quite literally. hypotheses are easily made in the absence of true counterfactuals. but i am fairly convinced that some of the measures which the ecb had to take in recent years to stabilise the euro area economy, and which have made it the target of criticism in some member states, could have been avoided if the recommendations of the european semester had been more effectively implemented by national governments. the increasing complexity of the stability and growth pact and the politicisation of its enforcement have not served us well. we thus need to review both the rules and their enforcement. we need to simplify them, depoliticise them and improve national ownership. governments should no longer have the option of using loopholes or blaming technocrats in brussels to hide their responsibility. national governments are accountable to their voters. strong and independent national fiscal councils should clearly explain to the public the potential consequences of imprudent fiscal behaviour for the stability of the country and the euro area as a whole. unfortunately, we no longer have a lack of examples. the third line of defence : effective area - wide instruments the crisis revealed that systemic shocks can go beyond the capacity of national fiscal budgets to provide effective stabilisation. the european stability mechanism ( esm ) has been a resounding operational success. it is a crisis management instrument and its role as such will be further strengthened by the welcome decision to make it a backstop to the single resolution fund and the introduction of new precautionary facilities. but the esm should be able to act decisively in a crisis by deciding with qualified majority, and it should be accountable to the people of europe under community law – two objectives which are not covered under the current reform proposal. let me repeat : intergovernmental decision - making may be politically convenient in the short term, but it carries a high economic cost in the longer run. it favours procrastination and turns every decision into a zero - sum game. intergovernmental crisis management increased the cost of the crisis for the greek people – in terms of the burden of adjustment –, for greece ’ s creditors – in terms of exposure and potential losses –, and for europe as a whole, in terms of trust and unity