yannis stournaras : 2023 - a year of continued uncertainty in the global economy, but also of hope speech by mr yannis stournaras, governor of the bank of greece, to the staff of the bank of greece at the new year ceremony, athens, 12 january 2023. * * * dear colleagues, i am delighted that we are all here today to welcome the new year. the past year was marked by russia's savage invasion of ukraine, which revived the nightmare of a great war in europe. for the global economy, it was a period of great challenges, during which the focus of global attention was on central banks'key mandate : the maintenance of price stability. after remaining very low for a long period, inflation picked up suddenly and escalated sharply, mainly as a result of two unpredictable supply - side shocks that hit the economy in successive waves : the pandemic and the war in ukraine, leading to rising fuel and other commodity prices. these two shocks are what we call " unknown unknowns ", i. e. they cannot be modelled with probability distributions and thus could not have been predicted by central banks, economic and financial organisations, academics or governments. as long as the war in ukraine continues and keeps shaking the world, along with other geopolitical tensions, uncertainty about economic developments remains heightened. high inflation affects all citizens, but especially the most vulnerable, and can trigger a vicious circle of price increases. as a result, consumption and investment planning becomes difficult for households and businesses alike. also, trust in the currency weakens, as money gradually loses its value. in such circumstances, as has happened in the past, citizens turn their eyes to central banks, from which they expect effective action to restore the stability of the purchasing value of the currency. in the euro area, businesses, investors, workers and consumers should feel confident that, we, not only at the governing council of the ecb but also everyone working in the eurosystem, will do whatever it takes, within our mandate, to ensure a timely return of inflation to the 2 % target in the medium term. our primary monetary policy instruments remain the policy rates of the european central bank, which are expected to rise further until the recent tentative signs of an abatement of inflationary pressures turn into certainty that inflation will fall back to the 2 % target over the medium term. it is important, however, to know that a central bank cannot control several factors that drive inflation,

economic destiny ” 5. now, austria has not become a bigger country than it was in those unhappy days, but something else has changed in our favor since then : we are now members of the european union and part of the euro area. in contrast to previous crises, this time our efforts to fight the recession are part of a coordinated european macroeconomic recovery plan upon which the european commission and the eu member states already agreed in november 2008. if we compare the situation with our last recession before entering the eu, which took place in the early 1990s, monetary union with our key trading partners is very helpful as it prevents competitive devaluations by some neighboring countries that harmed our economy back then. in that sense, the euro has worked as a shield for small open economies all over europe. what needs to be done now? policy makers are confronted with two main tasks at the moment. on the one hand they must restore stability in financial markets by bringing back liquidity, recapitalizing banks and getting toxic assets off banks ’ balance sheets. in europe, we have some examples that can serve as guidance for how to deal with a banking crisis, for instance the swedish and the finnish experience of the early 1990s. ( if anything, our own austrian experience from the 1930s would rather qualify as an example of how not to save banks. ) in austria we have already taken measures to establish confidence among savers, and our government has also presented a stabilization package for banks, to which it has allotted 100 billion euro, which is roughly 1 / 3 of the austrian gdp ; 15 billion euro are reserved for recapitalizing banks, 75 billion for bank guarantees and an additional 10 billion for insuring the domestic deposit protection. in terms of gdp, the austrian banks ’ stabilization package is among the biggest in the eu. paul krugman ( 2009 ) “ the return of depression economics and the crisis of 2008 “, norton, page 4. the second task we now face is to fight the global recession and prevent it from turning into a lasting depression. this is a challenge for both monetary and fiscal policy. the main objective of monetary policy in the euro area has always been to preserve price stability, in the current state of affairs means to prevent deflation. i can assure you that, at the governing council of the ecb we will take all available measures to stabilize the inflationary expectations in the euro area and keep them anchored in positive terrain. we will keep the interest rate very low for as long