fiscal policies and strong institutional frameworks are the foundation of economic stability, especially in the context of the euro area, which still remains an incomplete economic union, lacking a central fiscal capacity. before the crisis, the stability and growth pact ( sgp ) aimed to impose fiscal discipline across the eu. 1 / 8 bis - central bankers'speeches however, its enforcement was weak, and many countries repeatedly breached the pact's deficit and debt limits. the crisis underscored the importance of stricter fiscal surveillance and the need for credible enforcement mechanisms. to address these issues, the eu introduced the fiscal compact in 2012, mandating balanced budgets and stricter oversight. the european semester aimed to coordinate fiscal and economic policies among member states. moreover, post - crisis reforms included the european stability mechanism ( esm ), which provided financial assistance to countries in distress, tying its support to strict fiscal and structural reforms. the esm is an essential reform within the european economic architecture, as it acts as a financial backstop by providing a safety net for eurozone member states during times of economic and financial distress, helping to prevent the contagious effects of crises and ensuring stability across the region. lesson 2 : countercyclical fiscal policies. countercyclical fiscal policies are key to stabilising economies and avoiding selfdefeating effects of fiscal consolidation, while also creating fiscal buffers. many eurozone member states were forced into procyclical austerity measures during the crisis, including large cuts in public investment, which exacerbated economic contractions and worsened unemployment. having been greece's finance minister during 2012 - 2014, i can attest first - hand to the damage greece had to endure due to the imposition of overly restrictive fiscal measures. without overlooking the political constraints at the time, since a milder and more gradual fiscal consolidation would have required a larger financing envelope, and the need to enhance market confidence by addressing the country's credibility gap, a more flexible approach to fiscal policy could have mitigated the severity of the crisis. as we move forward, the new eu fiscal rules encourage countercyclical fiscal policies, balancing fiscal responsibility with the ability to support economic growth during crises. this is especially relevant in today's context, where high levels of public debt persist after the covid - 19 pandemic. the new framework accounts for country heterogeneity and provides greater flexibility regarding the medium - term fiscal consolidation plans. moreover, by focusing

a responsible path for the future. the challenges we face today – ranging from high debt levels to climate crisis, geopolitical risks posed by conflicts, geoeconomic fragmentation, demographic shifts, low productivity and deglobalisation trends – require us to remain vigilant and adaptive. should we confront rising debt vulnerabilities, the need for innovative and sustainable fiscal solutions will be more urgent than ever. the decisions we make today will determine not only europe's financial stability, but also the well - being of future generations. striking the right balance between fostering growth, ensuring fiscal sustainability and protecting the long - term interests of our societies is no easy task, but it is one we must face together. thank you all for your participation, and i look forward to the fruitful discussions. 8 / 8 bis - central bankers'speeches