period of very low 1 / 7 bis - central bankers'speeches inflation, followed by the closing down of economies and the prospect of deflation, then the return of very high inflation from the disruption of supply chains and a war - induced energy shock and now a relatively rapid process of disinflation. i expect a fragmenting global economy undergoing significant transitions - in demography, in technology, in climate - to mean that volatility and uncertainty will reflect a new normal, posing challenges to all economic policy - maker. the changing landscape of the global financial system the reality of course is that the pace of change in our economy and financial system has been accelerating rapidly since the gfc. it has required central banks, regulators, firms and consumers to adapt, transform and evolve to meet the challenge that it poses. the singapore fintech festival showcases and highlights the sheer breadth and depth of the innovation that is happening in financial systems across the globe and give policymakers an insight into the future. since the latter stages of the 17th century, when the world's oldest central bank, sweden's riskbank was founded, price stability, mitigating crises and stabilising economies have represented a central bank's primary mandate. while change and challenge has been constant throughout the history of central banking, the challenges and changes that central banks face today are more complex, more connected and more multifaceted than ever before. we are living in a world of unprecedented innovation1, change, complexity and uncertainty. in the past five years, we have endured a global pandemic and witnessed russia's war on ukraine and its people, as well as an escalating conflict in the middle east and an increasingly uncertain geopolitical environment. the break - down of a rules - based world order, the risks posed by, at best, reduced interconnectedness and, at worst, a preference for autarky and the prioritisation of shortterm, national interests over the common good, all add to the sense that the changes we are seeing feel different, and not in a good way. at the same time as this changing geo - economic landscape, the financial system both in ireland and globally has been undergoing its own rapid change over the last number of years. in particular, technological innovation has had a profound impact across all aspects of our lives and the provision of financial services is no different. technology is a key part of the financial services landscape today. and while the change so far has

– 10. just as expansive credit conditions filled the coffers in the good years, so the unwinding of an unsustainable domestic boom is draining the coffers in much the same way and to a similar magnitude. as many of you will know, the government has already taken prompt and painful steps to readjust its spending and tax profile, most conspicuously by effectively cutting public sector pay rates. it has kept to the targets it set for net budgetary savings in 2009 and 2010. i have recently been looking more closely though at the multi - year prospects for the budget. of course it can be said, if the economy stays close to the track originally envisaged, the deficit would come close to 3 per cent by 2014. but as the imf and others have noted, the real economy, the price level and also interest rates on government borrowing, have evolved in a less favorable way. servicing of the additional debt related to bank restructuring is also a negative factor. some explicit reprogramming of the budgetary profile for the coming years is clearly necessary soon if debt dynamics are to be convincingly convergent. recent movements in the yield spread on government debt – both for ireland and for some other countries – readily demonstrate the costs that can result unless international lenders remain convinced that the budget is going to be kept on a convergent path, as indeed the government is committed to ensuring. during the 1980s ireland paid a high price in terms of borrowing costs because the markets feared much steeper exchange rate depreciation than actually occurred. an equilibrium of pessimism, with the economy struggling, and investors requiring a risk premium that imposed additional costs on the taxpayer, displaced what could have been an equilibrium of selffulfilling optimism. it is important now to re - set the fiscal path to ensure a virtuous cycle of lower borrowing rates contributing to even faster fiscal adjustment and a lower overall cost of the adjustment to society at large. while there has been an international debate on this matter for larger countries, there seems to me to be no question, for ireland and for other small financially - stressed sovereigns, but that national growth is best served by ensuring that the public finances are convincingly on a convergent path : the impact on funding costs and confidence surely more than offsets any short - term adverse impact on domestic demand from lower net public spending. other recent european examples of banks imposing costs on the budget there have been several other high profile cases in europe