normalisation of economic and financial conditions. in addition, the commitment of our european partners to take action, in order to ensure the sustainability of public debt in the short and medium - to - long term, is a positive step forward. however, the envisaged public debt management measures need to be specified, quantified and frontloaded. this would enhance the credibility and acceptance of the policies pursued, thereby helping to further consolidate the climate of confidence and strengthen economic recovery. in this context, a lowering of the medium - term fiscal target from a primary surplus of 3. 5 % of gdp from 2018 onwards, to 2 % of gdp, without affecting public debt sustainability prospects is feasible, if coupled by mild debt relief measures. such fiscal relaxation would have beneficial effects for the greek economy, as it would allow taxation to be lowered, freeing up resources for supporting economic activity, while making fiscal targets economically and socially feasible. the actions described above will attract foreign direct investment and set in motion a virtuous circle signaling the exit from recession and a gradual recovery of the economy. the completion of the emu along the lines of the five presidents ’ report, by allowing more economic policy coordination and greater private and public risk sharing, is a prerequisite for its long - term viability and the long - term prosperity of its member states. last but not least, the euro area along with other areas of the world should confront certain of the undesirable consequences of globalization and technical progress. the failure to tackle unemployment, reduction of wages, worsening income distribution and tax evasion – mostly related to uncontrolled offshore activities – give rise to what we call failure of elites and worldwide populism. sources : baldwin, r and giavazzi, f, 2015, the eurozone crisis : a consensus view of the causes and a few possible solutions, 7 september 2015. w w w. voxeu. org / article / eurozone - crisis - consensus - view - causesand - few - possible - solutions baldwin, r and giavazzi, f, 2016, how to fix the euroze : views of leading economists, 12 february 2016. w w w. voxeu. org / article / new - voxeu - ebook - how - fix - eurozone bank of greece, 2016 monetary policy report 2015 – 2016, june. cepr, 2015, rebooting the eurozone : step i – agreeing a crisis narrative, policy insight, no. 85, november

( efsf ) to provide financial assistance to distressed member states. the efsf was replaced by the more powerful european stability mechanism ( esm ) in october 2012. in response to the strong negative feedback loops between banks and sovereigns as well as contagion among national financial markets, european leaders, in 2012, initiated the banking union. its three pillars are : the single supervisory mechanism, the single resolution mechanism and the still - to - be completed common deposit insurance scheme. significant progress has also been made as regards fiscal and economic surveillance. the stability and growth pact ( sgp ) was substantially strengthened by the adoption of the so - called “ six pack ”, and surveillance and coordination were enhanced through the so – called “ two pack ”. the european semester, the macroeconomic imbalance procedure and the country specific recommendations contributed to stronger macroeconomic surveillance. last but not least, the ecb has been addressing the severe and persistent disinflationary forces in the euro area economy with a broad set of non - standard measures. to a great extent, these measures have helped to improve financial conditions and boost the recovery in the euro area. macroprudential policy tools are also now available to secure financial stability. 3. the way forward current forecasts point to gradual recovery in both greece and the euro area. however, the recovery faces several headwinds, relating both to political risks linked to the rise of populism and anti - eu rhetoric, the refugee crisis, brexit and the crisis legacy, namely high unemployment, high public and private debt. in view of these risks and challenges, the way forward should involve structural reforms in order to improve the growth potential and to make greece and the euro area more resilient to future shocks, as well as greater economic policy coordination, convergence and risk - sharing inside the emu. 3. 1 improve the growth outlook and make greece and the euro area more resilient to 2 / 7 bis central bankers'speeches future shocks as noted in the five presidents ’ report, euro area economies should be able to absorb shocks internally. building such a capacity implies removing rigidities in the labour, product and capital markets, so that the relative price adjustment mechanism can work in a flexible and timely manner ( in the absence of exchange rate adjustment ) and for resources to be re - distributed rapidly to their most productive uses. structural reforms in the labour and product markets, as well as improvements in the business environment and the functioning of the