rate moved down from 10 % in 1995 to stage three ’ s initial rate, which practice was set already on 22 december 1998 when all the future euro countries lowered their instrumental rates to 3 %. to ensure that the fiscal goals enshrined in the convergence criteria would continue to guide policy in the monetary union, in 1997 the eu member states concluded the stability and growth pact. this pact ’ s best - known requirement is that a general government deficit is not to exceed 3 % of gdp and that if it does, sanctions will be applied. i should like to remind you, however, that the pact is also intended to promote a balanced development of government finances over the business cycle. all eu member states are required to present annual stability programmes ( in the case of non - euro countries, convergence programmes ) that are first discussed in the economic and financial committee and later in the ecofin council. in addition to these processes for testing that every country adheres to the rules, broad economic policy guidelines are drawn up annually. this document can be said to represent a common general approach to economic policy - a budget statement for the eu area. last but not least, there are processes for guiding countries along the road towards creating more efficient markets for goods, services, capital and labour. these are complex issues and the member states tend to differ considerably in their initial positions as well as their attitudes. but an intense dialogue has now started on structural issues at extraordinary council meetings, such the coming meeting in stockholm, as well as in more regular processes such as the luxembourg process for better employment policies and the cardiff process for more efficient product markets. the emu to date it must then be asked, of course, how well this framework is working now that emu is a reality. it is certainly too early to draw definite conclusions about these matters but i can offer some observations. the first point worth noting is that we are now reaping the benefits of the convergence process and of the consensus on stabilisation policy that has, in fact, been established. europe is now experiencing an economic upswing in which macroeconomic conditions are more stable and inflation expectations lower than for many decades. since the move to emu, there have been no clear signs of asymmetric shocks that might hit a particular country or group of countries, although the asian crisis and the subsequent unrest did affect the member states somewhat differently. and we do not know what would have happened during the tempestuous autumn of 1998 if stage three had not

measures in meeting their objectives during the autumn. be prepared, but prepared to act the variety of these macro - prudential tools provide flexibility that may be required in response to many shocks, domestic or global. standing alone, a disorderly brexit would argue for accommodative policies, for example allowing the automatic stabilisers to work and targeted fiscal measures for the most severely affected sectors. if any of the more global risks were to crystallise and have a significant effect on the domestic economy, they would likely pose different challenges. whether it be dealing with the effects of storms blowing in from abroad, or having protection from the sun on those warm irish summer days, the central bank stands ready to adjust the ccyb ( buffer ) in either direction as the risk environment evolves, in order to support a sustainable supply of credit to the economy. we can ’ t control the weather. but we must ensure the system is resilient, and continues to function into the future, come rain, hail or shine. finally, i hope you will allow me take the liberty of speaking at an event like macgill to briefly look beyond the central bank tool kit. as policymakers, we serve the irish public, the risks we face often overlap. and it is beneficial for all when our policy responses are in tune. while the domestic economy is doing well, we have the opportunity to boost our resilience to future shocks and risks. prudent management of the public finances are needed. interest payments on national debt are lower than expected and corporate tax receipts are high, but neither situation should be regarded as permanent14. these funds should be put to work to buffer against the next downturn or crisis and not to finance current expenditure or to boost an economy which is close to capacity. a clear strategy guiding the use of unanticipated revenue inflows should be promptly established. moreover, the reduction of public debt ought to remain a key priority given its very high level. to somewhat labour the analogy, we must ‘ fix the roof while the sun is shining ’. final points finally, as i said at the beginning, the global environment is uncertain, and with brexit looming, we should be ready to respond if these risks materialise. but it is imperative that we are nimble and ready to cool the warming economy if these risks dissipate. we must not only be prepared, but prepared to act. 1 i would like to thank caroline