benoit cœure : greece - progress, challenges and the way forward speech by mr benoit cœure, member of the executive board of the european central bank, at a conference organised by the economist " greece : a comeback to the financial markets? a glimpse into europe's financial landscape ", frankfurt am main, 31 may 2017. * * * thank you for inviting me to speak here today. the topic of this conference is very timely. as you know, in recent weeks the greek authorities have made significant progress in adopting measures to finalise the second review of the esm programme. discussions on medium - term debt measures and a new imf programme are ongoing and expected to be concluded in the weeks ahead. in my short remarks this morning, i will explain why timely clarity on debt measures and debt sustainability is important – not only to restore trust in public finances but also to help rebuild confidence in the greek economy more generally, and the financial sector in particular. but i would first like to focus on one element of the greek adjustment programme where i believe the ecb ’ s advice is of particular relevance – the financial sector strategy. financial sector reforms are a key element of macroeconomic adjustment programmes, for one simple reason : any sustainable economic recovery needs to be supported by an adequate supply of credit. without credit, firms may not be able to invest in productive capital, create new employment or cover ongoing expenses. a healthy credit supply is also important for our monetary policy to filter through to households and firms : it is one of the main ways in which we can affect bank lending conditions and, ultimately, price developments. indeed, the broad - based and solid recovery we are currently observing in the euro area economy owes much to our policy measures having been effective in repairing the bank lending channel – that is, in overcoming credit supply restrictions and in bringing bank lending rates down to levels consistent with our monetary policy stance. greece is a sad exception, unfortunately. bank loans to the domestic non - financial private sector have contracted in every quarter since end - 2008 and by a cumulative 28 % up until the end of last year. and although the level of loans to the private sector has stabilised recently, rates on loans to firms are still some 250 basis points above the current euro area average. main challenges for the greek financial sector this means, of course, that there is still important work to do to allow credit to become a net contributor – rather than an impediment – to growth in greece and to

have acted decisively, raising rates by 200 basis points, and we expect to raise rates further to the levels needed to ensure that inflation returns to our 2 % medium - term target in a timely manner. but if we want to rebuild our supply capacity and strengthen domestic sources of growth, other policy areas need to refocus. most importantly, they need to direct investment towards the transitions that will define our future – and the financial sector needs to be able to actively support these transitions. consistency between public policy areas remains important in a post - pandemic world. if we respond separately to today ’ s challenges, we risk standing in each other ’ s way. but if we act together, we can rise to those challenges and ensure that our objectives are met. 1. balke, n., jin, x. and yucel, m. ( 2020 ), “ the shale revolution and the dynamics of the oil market ”, working papers, no 2021, federal reserve bank of dallas. 2. lagarde, c. ( 2021 ), “ globalisation after the pandemic ”, 2021 per jacobsson lecture at the imf annual meetings, 16 october. 3. lagarde, c. ( 2022 ), “ a new global map : european resilience in a changing world ”, keynote speech at the peterson institute for international economics, washington, d. c., 22 april. 4. international monetary fund ( 2022 ), “ near - term macroeconomic impact of decarbonization policies ”, world economic outlook, october. 5. lagarde, c. ( 2022 ), “ monetary policy in a high inflation environment : commitment and clarity ”, lecture organised by eesti pank and dedicated to professor ragnar nurkse, tallinn, 4 november. 6. for example, europe is aiming to double its share of the global market for semiconductor production to 20 % by 2030. see european commission ( 2022 ), “ digital sovereignty : commission proposes chips act to confront semiconductor shortages and strengthen europe's technological leadership ”, press release, 8 february. 7. international energy agency ( 2021 ), “ the role of critical minerals in clean energy transitions ”. 8. refers to firms which developed or introduced new products, processes or services as part of their investment activities. see european investment bank ( 2022 ), investment survey. 9. ferdinandusse, m., nerlich, c., and delgado