republic at the end of 2014, which led to early elections in 2015 and to the unfortunate negotiations of the first half of 2015. these, in turn, led to the signing of the third adjustment programme, capital controls, another bank recapitalisation round and two years of economic stagnation. seventh, political economy deliberations in the euro area also played their part in delaying the recovery of the greek economy. the eurogroup decision of november 2012 to grant further debt relief was put off for several years and was implemented only in june 2018. this undermined the growth prospects of the greek economy and prolonged the duration of the crisis. last, but not least, when the greek crisis broke out, the emu lacked the tools to avert and contain the crisis ( see katsimi and moutos, 2010 ). the eu fiscal rules ( stability and growth pact − sgp ) failed to avert the soaring public debt, and there was no monitoring and control over macroeconomic imbalances. moreover, euro area crisis management and resolution tools were practically non - existent due to moral hazard concerns. instead, the ecb stepped in to contain the spillover risk to the rest of the euro area. 2. significant progress has been made since the beginning of the debt crisis despite the missteps and delays, significant progress has been made since the beginning of the sovereign debt crisis in 2010. the implementation of a bold economic adjustment programme has eliminated the root causes of the greek crisis ( see stournaras, 2019a, 2018a, b and malliaropulos, 2019 ). it is particularly worth noting that : • the fiscal adjustment was unprecedented, turning a primary deficit of 10. 1 % of gdp in 2009 into a primary surplus of 3. 9 % of gdp in 2017. • the current account deficit has been reduced by more than 12 percentage points of gdp since the beginning of the crisis. • labour cost competitiveness has been fully restored and price competitiveness has recorded substantial gains since 2009. 2 / 8 bis central bankers'speeches • a bold programme of structural reforms was implemented, covering various areas, such as the pension and healthcare systems, goods and services markets, the business environment, the tax system, the budgetary framework and public sector transparency. meanwhile, the role of the bank of greece was pivotal in the restructuring and the recapitalization of the banking system as well as in the enhancement of its corporate governance. today, banks ’ capital ad

issue subordinated debt and the government announced that it will subscribe to these issues for eur 10. 5 billion. it is expected that such support will boost their capital position and as a result ensure these banks to keep up their lending to the economy. did the french banks really need such a boost to their solvency and capital? setting aside dexia, the answer is not really. dexia was very specific : because of its large exposure to us monoline risks, public recapitalisation was absolutely necessary. by contrast, all the other french banks, without exception, have sufficient own funds, be it in terms of prudential requirements or in comparison with their peers from other developed countries. public recapitalisation is not aimed at making up for faults or weaknesses. rather, it is to anticipate potential problems. circumstances are indeed exceptional ; even the soundest and most profitable banks cannot take it for granted that they will be able to tap markets to meet their funding and capital needs. as long as such uncertainty pervades and markets continue to fail, it is the public authorities ’ duty to protect the credit system and safeguard the financing of the economy. the macroeconomic outlook it is fair to say that the public opinion is worried about the economic consequences of the financial crisis. i understand these concerns. yet, i do not totally share them. let me explain. when attempting to understand the situation we are facing, it is tempting to look at the past and draw lessons by mere analogy. indeed, some sort of an intellectual vogue is flourishing, which contends that, in light of past experiences, any banking crisis is bound to have severe adverse economic consequences. you have those, the optimists, who predict a swedishtype of crisis. and you have those, the pessimists, who allude to japan's " lost decade ". if referring to the past is of any use, it is precisely to learn from past errors. as a result, any comparison is bound to be misleading. not only is today ’ s economic situation critically different. it is also addressed very differently. let me insist on one key difference, which has to do with policy reactions to the crisis. they have been extraordinarily rapid, massive and vigorous. we have learnt from past crises, especially from the long adjustment japan has been through after the burst of the asset price bubble in the late 80s. let me also mention that macroeconomic policy instruments are available and could