finances over the business cycle, and avoid the destabilizing effects of fiscal policy procyclicality. creation of a central fiscal capacity of all eurozone member states, by making ngeu a permanent fiscal instrument, in order to meet the high investment needs, which are required to address the challenges of climate change, energy and digital transition of our economies. such a framework should rest, i think, on three pillars : 1. first, a revised fiscal framework should give priority to strengthening debt sustainability, in line with the spirit of the “ 6 - pack ” reform. in the post - pandemic period, the adoption of credible and effective fiscal policies aimed at public debt sustainability is more urgent than ever. high levels of public debt : ( i ) limit the room for flexibility to address future challenges ; ( ii ) make public finances vulnerable to interest rate increases ; and ( iii ) undermine the ecb ’ s ability to respond to rising inflationary pressures. lower public debt also contribute to reducing divergences between member states, as debt ratio differentials lead to variations in the fiscal space available to each country to stabilize the economy after a shock and to finance growth - enhancing expenditure. therefore, in such an uncertain economic environment, it is imperative to strengthen fiscal sustainability and increase the resilience of public finances to adverse shocks. 2. the second pillar should reinforce the incentive of national authorities to increase the resilience of their economies by strengthening their fiscal buffers in good times. so, the principle of fiscal policy counter - cyclicality should be promoted in the sgp reform. what is crucial is to safeguard ( and even promote ) economic recovery and restore fiscal sustainability in a sustainable way. therefore, in this regard, i believe that three elements should be highlighted : firstly, country - specific rate of debt reduction. a uniform rate of debt reduction is inappropriate for a monetary union with large dispersion of debt - to - output ratios among member states. importantly, the key determinants of debt sustainability, such as the implicit interest rate and the natural rate of growth, are primarily country specific. secondly, a country - specific speed of adjustment is crucial for credible, medium - term, fiscal consolidation plans that account for counter - cyclicality concerns. thirdly, an expenditure rule which determines a cap of the medium - term growth of nominal expenditure, excluding automatic stabilizers on the expenditure side, and net of interest payments and new permanent taxes, with the objective to sustain the agreed primary

home / news and media / newsroom / news list / news speeches remarks by governor of the bank of greece yannis stournaras at the 22nd rencontres economiques, d ’ aix - en - provence 10 / 07 / 2022 - speeches “ beyond risk reduction and risk sharing : remarks on the transformation of economic governance in europe ” the russian invasion of ukraine on 24 february 2022 has brought the european union ( eu ) and the western developed world as a whole in front of the greatest challenge since the end of the cold war. the military conflict has unpredictable consequences not only for the global and the european economies, but also for international geopolitical stability, security, peace and cooperation. it triggers tectonic shifts in world politics and urgently calls for an update of the eu ’ s security architecture, as well as for action to defend european values and institutions. shoring up the european economy against the effects of this new shock and preventing an interruption of the ongoing recovery are key priorities for the current economic policy at the european level. the magnitude and duration of these effects will depend on how the war unfolds, on the impact of the current sanctions and possible further measures and on the response of fiscal and monetary policies. the rupture in eu - russia relations will inevitably have lasting and far - reaching impacts on the european economy, particularly in terms of energy, defence and security, while the largest refugee crisis since 2015 is unfolding, this time with flows coming from within the european continent. russia ’ s war against ukraine is heightening the geopolitical tensions between the us and the eu, on the one hand, and russia, on the other. it is a new, major exogenous supply - side shock to the economies of the eu member states that also affects, through various channels, aggregate active demand. it occurred at a very critical time, when economies were rebounding globally from the two - year health crisis and the ensuing severe recession. apart from the incalculable human cost, the conflict has significant adverse effects not only on the economy in the wider region, but also on the global economy. it exacerbates the already strong inflationary pressures through further rises in energy prices and a new wave of medium - term price increases in metal commodities and basic consumer goods, notably in the food supply chain ; it erodes investor and consumer confidence and disrupts global trade and the international financial system. globalisation is in fact reversing.