also needs to be responsive to customers'needs in order ensure its legitimacy and support of the electorate. public services need to provide a good match with the preferences of a median voter. without such a match, the funding base of the public sector ( taxes ) will inevitably start to erode. this could lead to a vicious circle that would be difficult to reverse. 5. conclusions so, what is the answer to the question that i posed at the beginning, i. e., is the european social model an asset or a liability? as is often the case in real life, the answer is : " it depends ". namely, in a rapidly changing environment any static model is likely to become a liability. indeed, economic systems are so complicated that no single policy prescription can ensure rapid and sustainable growth over the long run. therefore, it would be helpful to shift the focus from copying particular " models " to analysing what structures are needed to support successful and adaptable approaches. i have attempted to do so by examining the experience of the nordic countries. this experience suggests that it is possible to combine economic dynamism with a system that is consistent with the core european values. the key lesson to be drawn from the apparent success of the nordics is the importance to ensure that both the private sector and public policies are capable of adapting to changing circumstances. to sustain a social system that is in keeping with the core european values, we need the following, mutually reinforcing three pillars : • a competitive private sector exposed to free competition ; • sound and transparent institutions ; and • an efficient and responsive public sector. there is no silver bullet. however, as i have argued, an active and open civil society plays a crucial role in keeping all these three pillars strong. going forward, european values of solidarity and social cohesion will be tested by centrifugal forces arising from globalization, rapid technological advances and population ageing. nevertheless, they should continue to guide policy choices also in the future. ensuring that these values are truly reflected in european social models will require many painful decisions, and we must be mindful of the dangers of populism. this calls for a frank and honest political discourse that recognizes the benefits and downsides of globalization and other forces that shape the future. this, combined with a well - educated electorate, press freedom, and a culture of transparency provide a powerful antidote against populist policies. i see some similarities between the current rapid phase of globalization and the

##s and accelerating inflation. and in february 2022, russia launched its illegal war in ukraine. the energy crisis caused by the war hit the european economy hard. the euro area's imported energy bill increased in 2022 by €400 billion, i. e. by around 3 – 4 % of gdp. this meant a substantial and possibly longlasting cut in the average european's standard of living. 2 / 5 bis - central bankers'speeches at that point, the combination of stagnant growth and accelerating inflation was a completely credible prospect. on the one hand, the sharp rise in energy prices accelerated inflation. and on the other, the substantial increase in geopolitical uncertainty and the ending of energy imports and trade with russia seemed destined to undermine europe's economic recovery. monetary policy was thus facing a major dilemma. after a period of deliberation from march until june, the ecb began, in july 2022, a series of policy rate increases that was exceptionally rapid and consistent – due to the exceptionally high inflation rate. in line with our revised strategy, our goal was to tame inflation over the medium term by preventing a wage - price spiral and thus keeping inflation expectations anchored. in my view, this goal has been, by and large, achieved ( see graph ). our symmetric 2 % inflation target and the medium - term orientation of monetary policy have made a soft landing possible : economic growth has been somewhat subdued as a result of the rise in interest rates, but the risk of a persistent economic crisis has been avoided, and inflation has been stabilized over a period of 2 – 3 years ( knock on wood ). some have argued that we did not hit the brakes early enough. let me say that many of us policymakers would in fact have been ready to raise rates already in march 2022 in the face of soaring inflation, but russia's invasion of ukraine brought a return to the era of brutal geopolitics and created a massive cloud of uncertainty over europe's economy. my initial feeling – even in retrospect, a completely rational one – was that it would probably have serious stagflationary consequences, hitting growth and generating inflation, a kind of " back to the 70s ". in that context, it made complete sense to pause for a minute and wait for the clouds to clear before choosing the policy stance. this is something worth remembering in all post - mortems of the recent polycrisis years. this links very much