##ity to address the underlying vulnerabilities, moral hazard was much less of a concern when the pandemic hit. therefore, the pepp was, by design, unconditional, but also temporary and linked to the pandemic. we will react to new emergencies with existing and potentially new tools. these tools might again look different, with different conditions, duration and safeguards to remain firmly within our mandate. but there can be no doubt that, if and when needed, we can and will design and deploy new instruments to secure monetary policy transmission and hence our primary mandate of price stability. conclusion let me conclude. the diversity of the euro area is one of its greatest assets, but it also poses challenges for policymakers. one of these challenges is the threat of financial market fragmentation that can impair the transmission of monetary policy. i have argued that the responses to past crises have contributed to reducing these risks. the considerable progress made on both the monetary and fiscal side has strengthened the resilience of the currency union. but further progress is needed. in order to improve the euro area ’ s institutional architecture, governments need to take further steps, including by completing banking and capital markets union, by improving public risk - sharing through a permanent fiscal tool at european level, as well as by creating a euro area safe asset, properly designed to avoid adverse incentives. in the meantime, monetary policy will need to respond to destabilising market dynamics. we will not tolerate changes in financing conditions that go beyond fundamental factors and that threaten monetary policy transmission. this commitment is especially important at times of exceptionally large uncertainty and challenging economic circumstances, such as today, when monetary policy has to tackle the challenge of unacceptably high, persistent and broad - based inflation that risks becoming entrenched in expectations. we are therefore monitoring current market developments closely. by countering fragmentation, monetary policy will contribute to our journey towards european unity – without abandoning diversity. i very much hope that the younger generation – all of you graduates here today – will support this process towards greater european unity, while embracing diversity. thank you. annexes 14 june 2022 slides english 1. aizenman, j., hutchison, m. and jinjarak, y. ( 2013 ), “ what is the risk of european sovereign debt defaults? fiscal space, cds spreads and the market pricing of risk ”, journal of international money and finance vol. 34, pp. 37 – 59. 2. gibson

mario draghi : the international dimension of monetary policy introductory speech by mr mario draghi, president of the european central bank, at the ecb forum on central banking, sintra, 28 june 2016. * * * in recent years central banks across advanced economies have been engaged in the same task, namely raising inflation and inflation expectations back to levels consistent with price stability. each has faced conditions particular to its own jurisdiction. each has deployed measures appropriate to its own context. and each has acted to fulfil the mandate laid down in its own constitution. and yet, the fact that all central banks have faced a common challenge of low inflation is not coincidental. there are global factors at play. and this begs the question, what is the best way for us to deal with them? at one extreme, central banks can take global conditions as entirely exogenous and set their policies accordingly. at the other extreme is explicit coordination of monetary policies. in between is a range of informal solutions. whatever one ’ s views on these options, what is clear is that the question of the international dimension of monetary policy is becoming more pertinent, since the common factors affecting central banks are increasing. the global drivers of inflation indeed, a growing literature suggests that globalisation has created a common factor in inflation developments, which goes beyond fluctuations in energy or commodity prices. higher import volumes have increased the importance of international prices and wages relative to domestic ones, making the global output gap more relevant. 1 in that context there are two types of factors that are significant for the global low inflation environment we face today : more cyclical factors that have put downward pressure on prices ; and more structural factors that have lowered the equilibrium real rate and slowed down the response of the economy to monetary policy. the first type of factors includes the large negative output gaps generated by the financial crisis and its aftermath, which still average 1 % among g7 economies today. 2 this global slack has dampened in particular import and producer price inflation, both of which have been weak for several years among advanced economies. prices set by producers in the euro area and those set by producers in trading partner countries are indeed highly correlated. 3 also depressing global inflation has been the slump in demand for energy and commodities linked to the slowdown in emerging markets. this has fed not just into lower headline inflation as a global phenomenon has been documented e. g. by m. ciccarelli and b. mojon ( 2010 ), “ global inflation ”