to ensure fiscal discipline. in other words, in the famous rules / discretion debate, we need indeed more discretion - but not too much ; and we need less mechanical or obscure rules, but we still need rules. the set - up should indeed ensure binding thresholds for the minimal annual adjustment of public finances. let me add that the more we progress effectively on national fiscal discipline, the easier we could envisage a common fiscal capacity – which we badly need. mario draghi eloquently advocated it recently, v and i wish it will be part of his new mission on competitiveness in europe. to conclude, let me borrow a fundamental principle from physics, stated by isaac newton : " when two forces unite, their efficiency double ". well, it is time to combine the two forces of our monetary and fiscal policy, towards a greater efficiency of our euro area economy and to the benefit of our citizens. thank you for your attention. i press release : governors and heads of supervision endorse initiatives in response to the banking turmoil and reaffirm priority to implement basel iii. ii eurogroup statement on the euro area fiscal stance for 2024, press release, 13 july 2023. iii c. bouthevillain, s. debu, towards a much - needed reform of eu fiscal rules : the european commission's proposals, banque de france bulletin no. 246 : article 2, 21 june 2023.. iv x. debrun, l. jonung, under threat : rules - based fiscal policy and how to preserve it, european journal of political economy. v the economist, mario draghi on the path to fiscal union in the euro zone, 6 september 2023. 3 / 3 bis - central bankers'speeches

compromising the stability of the system. i would now like to turn to our economic situation and monetary policy. the state of our economy the past year has been a trying one, both for the world economy and for canada. still, considering the seriousness of the global difficulties we have been facing, the canadian economy has coped much better than expected, and certainly better than in the past. this is because it is in sounder shape now than it has been for many years. canadian businesses have been investing in new technology to increase productivity and efficiency. governments are no longer draining national savings to finance huge budget deficits. and with the bank of canada ’ s commitment to inflation control targets, inflation is low and stable. but what about our economic prospects as we look ahead? let me start with the financial climate. global financial markets have been calmer recently compared with the turbulence last autumn after russia declared a debt moratorium. cuts in official interest rates around the world since then, and the success of some emerging market economies in addressing their problems, have clearly helped. international investors ’ fears have abated, and markets seem to have regained a sense of their ability to assess risks and discriminate among borrowers. when it comes to the world economic environment, there is still uncertainty out there. but there are also positive elements in the picture. one area of uncertainty is the financial problems in brazil and the extent of related economic weakness in latin america more generally. if the brazilians follow through on their fiscal adjustment program and limit the inflationary fallout from the depreciation of their currency, financial market pressures should ease, and growth in brazil should resume next year. but the foremost uncertainty in the outlook continues to centre on japan, where the economy remains in a slump. nevertheless, if present efforts at bank reform continue, and if stimulative macroeconomic initiatives are pursued systematically, the japanese economy should begin a gradual recovery, perhaps by late 1999. the economic expansion in the other industrial countries, which together account for about half of world output, should remain relatively well sustained. in europe, economic activity has softened, but interest rate cuts since the autumn and the easing of global financial strains should help support confidence and domestic spending in coming months. the most positive element, certainly from a canadian perspective, has been the remarkable performance of the united states. that economy ended 1998 on a much stronger note than had been expected, growing at an annual rate of 6 % in the fourth quarter of 1998. thus