To an increasing extent, however, we have also been working to embed our supervisory practices within a broader macroprudential framework that focuses not only on the conditions of individual firms but also on the health of the financial system as a whole.
This leads to the second conclusion, which is that we need to boost the effectiveness of demand policies in each euro area country, and a key contribution to this is improving supply-side policies. Impaired supply conditions hamper the effectiveness of demand stimulus through several channels. A debt overhang across sectors squeezes fiscal space and blunts the impact of monetary policy on investment and consumption.