the governments. this is why we have been asking for more flexibility in the efsf and very much welcome decisions taken in this regard on july 21st. whether amounts are big enough is a matter of opinion. it would be unrealistic to expect an increase in the efsf itself but i am personally open to any scheme that would allow existing commitments to be leveraged to provide greater intervention capacity. at the moment, the kind of insurance that most monetary authorities provide may look cheap because inflation is projected to stay low in the foreseeable future. but this equilibrium could be unstable in a different inflation environment. while markets are currently rewarding those countries which liquefy public debt, they seem to be aware of some inflation “ tail risks ” and hedge themselves through gold and the chf – whose prices have reached historical highs. at this stage, therefore, the euro area is paying a double price. one for its mistakes and one for its virtues. the mistake, for governments, was to allow the piling up of debt through unsustainable fiscal policies over a decade, and then to create ex nihilo a doubt as to their ability to pay those debts. and we are also paying the price for our virtue and our refusal to liquefy our debt through massive monetization of our fiscal deficits. will our virtue be rewarded at the end? i believe so and, to explain why, i need to take a longer - term perspective. in the next decade, the world will be divided into two : on the one hand, advanced economies, with high absorption capacity, low savings and high debt with ratios between 85 % and 100 % ; and, on the other, emerging economies, with high savings, low debt ( around 30 % gdp on average ) and less absorption capacity. our common prosperity will therefore depend on our ability to create stable channels and mechanisms of financial intermediation between those two parts of the world. that, in turn, will crucially depend on the existence of assets that can be considered safe stores of value. as i have said from the start, public debt may not be able to play that role to the same extent as before. the ultimate safe asset, therefore, will be the currency itself. markets and lenders will trust those currencies that, whatever the circumstances, are managed with one overriding priority : preserving price stability and the intrinsic value of the currency unit. on this fundamental basis, we can look at the future of

. the underlying inflation trend needs to remain stable at around 2 percent in order to achieve the bank's price stability target of 2 percent in a sustainable and stable manner - - even after the impact of higher import prices disappears completely. to that end, it is necessary above all for nominal wages to continue rising at a level consistent with the 2 percent price stability target. 1 this is because, if there is a given uptrend in nominal wages, this will contribute to higher prices, mainly for services, and thus, there will also tend to be a given uptrend in general prices. this is why the bank made clear in its forward guidance in april 2023 that, by patiently continuing with monetary easing, it aims to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases. b. significance of achieving both price stability and economic growth as i have just outlined, major central banks around the world, including the bank of japan, have been conducting monetary policy with the aim of achieving and maintaining a situation in which the year - on - year rate of increase in consumer prices is stable at around 2 percent, albeit with differences in their policy directions. this stance is based on the experience of various countries to date and the insights of experts. namely, a certain degree of mild inflation taking hold as a trend is considered desirable in order to achieve both price stability and economic growth. thus, high inflation, deflation, and excessively low inflation are all deemed undesirable. the reason why many major central banks have continued with monetary tightening at this point is that current inflation in a large number of countries and regions is considered to be the result of excess demand outstripping the economy's potential production capacity, which is mainly constrained by labor supply. implementing further economic stimulus measures under these circumstances will merely result in higher inflation and will not induce a higher level of production. moreover, excessively high inflation carries its own economic since the real wage growth rate is virtually identical to the labor productivity growth rate over the long term, if the labor productivity growth rate is 1 percent, adding 2 percent to that value yields a value of 3 percent, which will be the nominal wage growth rate consistent with the 2 percent price stability target. however, the labor productivity growth rate is fundamentally determined after incorporating the efforts of individual private - sector firms, such as research and development and improvements in business and production processes, and thus its value cannot be determined in advance. inef