the eurogroup decisions made as far back as in november 2012 ( and iterated most recently in may 2016 ), and the threat of default and euro area exit brandished against greece by some of our partners whenever negotiations seemed to stall, even on just technical matters, has weighed heavily on market sentiment, further fueling uncertainty and negatively affecting the economic climate in greece. certain miscalculations in the design of the economic adjustment programmes could also explain greece ’ s lagging behind vis – a – vis the other countries, previously under programmes. given the size of the fiscal imbalances back in may 2010, when the first economic adjustment programme was initiated, more emphasis was placed on fiscal consolidation, pension reform, streamlining budgetary procedures, increasing fiscal transparency, as well as financial sector restructuring. less emphasis was given on growth - enhancing labour market reforms and, most notably, on product and services market reforms and reorganizing the public sector. in addition, growth forecasts were too optimistic and fiscal multipliers turned out to be higher than initially anticipated. as a result, the economy was trapped in a vicious circle of austerity, recession, rising unemployment and private debt overhang. despite the recouping of losses in international competitiveness, exports have underperformed relative to what could have been anticipated based on historical correlations. this can in part be explained by the lack of financing, higher long - term borrowing costs, increased uncertainty, as well as the higher tax burden, which slows or even halts progress towards restoring overall competitiveness. in addition, this can also be attributed to a number of inherent structural weaknesses that hamper the international market penetration of greek products and involve noncost aspects such as product quality, protected designation of origin and branding, red tape, etc. hence, despite the improvement in structural competitiveness over the period 2013 – 2014 ( according to a number of indices compiled by the oecd, the world bank, and the world economic forum ), greece still ranks at the lower end of the advanced economies, and progress has stalled or even reversed slightly in recent years. 3. recent developments and prospects in spite of the delays and missteps, progress in correcting past mistakes has been remarkable. for example, the new esm programme in place since august 2015 builds on the successes of the first two programmes ( i. e. the correction of fiscal and external imbalances and the improvement of labour cost competitiveness ) and aims at

yannis stournaras : financial stability in europe and how to improve it speech by mr yannis stournaras, governor of the bank of greece, at the croatian national bank “ financial stability and policy intervention by central banks in europe – where do we stand and what challenges lie ahead ”, zagreb, 23 march 2016. * * * before i begin my presentation, please allow me to dedicate the following remarks to the late vassiliki zakka, who was an exceptional colleague at the bank of greece and a dear friend. before passing away unexpectedly several weeks ago, vasso had contributed to the drafting of this speech. she will be badly missed. ladies and gentlemen, it is a great pleasure to be in zagreb today and to have the opportunity to share with you some thoughts on financial stability in europe and, in particular, how to improve it. financial stability is a critical condition for achieving our common goals of prosperity and sustainable growth. yet, the financial landscape on which both regulators and market participants operate, has been rapidly changing ; it is very different today from what it was only ten years ago, and it will be very different ten years from now. i will begin by describing the present landscape on which efforts to strengthen financial stability have been taking place. then, i will briefly discuss some developments in the eu regulatory framework relevant to the financial system and its stability. in particular, we can identify a new role for central banks in this framework that stems from mandates that have been revised to include the safeguarding of financial stability. i conclude by outlining the challenges ahead and i provide some thoughts on the way forward. a. the setting – a broader context beginning with the initial efforts to forge closer european integration in the early - 1950s, the european union has faced a series of challenges that have, at times, tested both the coherence and the stability of the union. the responses to these challenges have shown that the eu is built on solid ground as the bonds among member states have become stronger over time. to cite two notable examples : the breakdown of the bretton woods system in the early - 1970s led to the creation of the european monetary system – or ems – in the late1970s ; the breakdown of the ems in the early - 1990s led to the creation of the euro in 1999. developments since the eruption of the 2007 – 08 international financial crisis have further strengthened the bonds among eu members. that crisis raised issues related to “ too - big - tofa