, the overall debt restructuring framework in the euro area, shaped by the experience of the european debt crisis, has evolved significantly to address more effectively sovereign debt challenges. in particular : - the esm, which acts as a permanent crisis resolution mechanism, has the legal mandate to restructure sovereign debt if necessary. - since 2013, all new euro area government bonds with maturities of more than one year must include collective action clauses ( cacs ). the use of cacs is a core component of the new debt restructuring framework, designed to ensure that restructuring can be carried out in an orderly manner, limiting market disruption. - the esm and the ec play a central role in conducting dsa before providing financial assistance. the framework is used to guide decisions on the necessity and the scale of any potential debt restructuring. - the experience of the greek debt restructuring highlighted the significance of the private sector involvement ( psi ) in sovereign debt crises. the greek case revealed the potential benefits and challenges of psi, where the involvement of private creditors helped reduce greece's debt burden, but the process also raised concerns about contagion risks. 4 / 8 bis - central bankers'speeches - the euro area crisis underscored the need for orderly and predictable debt restructurings. past experience has shaped principles to minimise financial market volatility. timely intervention is crucial, as early restructuring, if needed, is more likely to be successful before debt levels spiral out of control, than long, drawn - out restructurings. - the legal and institutional framework for debt restructuring has been enhanced to prevent moral hazard, ensuring that governments adhere to fiscal rules. the fiscal compact and the revised sgp impose stricter fiscal discipline to prevent excessive debt accumulation. the framework also ensures that sovereign debt restructuring is treated as a last resort, after all other policy measures ( such as fiscal adjustment, structural reforms, liquidity support ) have been exhausted. all in all, following our experience, the eurozone is much better equipped to manage sovereign debt crises in the future. however, the need for continued vigilance, early intervention and fiscal prudence remains essential to ensure that sovereign debt crises can be prevented and, should they arise, be resolved efficiently. 3. financial stability : a pillar of economic resilience the crisis also exposed vulnerabilities in europe's financial stability framework. the increase in the sovereign - bank nexus created a vicious circle of contagion, where failing banks weakened sovereigns and vice versa. the euro

. therefore, it is essential to establish an effective framework for macroprudential supervision that will ensure both the systematic analysis of risks and the formulation of policies to address such risks. the state of the greek economy the economic slowdown has been less severe in greece than in many other european countries. however, this outcome reflects factors that, if left untreated, will reduce growth potential in the medium term. specifically, the performance of the greek economy during the crisis reflects the relatively - low level of openness and the deterioration of public - sector balance sheets from a position that was already worrisome prior to the onset of the crisis. a factor that has, however, supported the greek economy has been the soundness of its banking system. greek banks have been free of toxic assets and their exposure to the emerging economies of south - eastern europe has remained within manageable limits. a recent stress test conducted in close cooperation with the imf has reaffirmed the soundness of the greek banking system. the relatively - high growth rates experienced by the greek economy since its entry into the euro area reflect a catching - up process. to sustain a robust growth rate in the future, greece will need to address several key challenges, reflected in persistently very large currentaccount imbalances, high fiscal deficits, and worrisome debt levels. these imbalances are the result of structural rigidities, which have undermined competitiveness over time. to restore competitiveness and remove the imbalances, a dual agenda needs to be concurrently implemented : first, a multi - year program of fiscal consolidation, which can reduce risk premia and crowd - in private investment, raising the growth potential of the economy ; second, bold and wide - ranging institutional reforms in the public sector and structural reforms in product and labor markets, which can enhance productivity and raise the employment rate. only by undertaking these reforms will the greek economy be able to become more competitive and increase its growth potential and the prosperity of its citizens. the broad support received by the newly - elected government will greatly facilitate the implementation of the reform agenda.