Such risks do not necessarily materialize, but when they do, the repercussions are dramatic. Altogether, considering the different tools are potentially at the disposal of policy-makers, it is crucial to gauge the short- to long-run benefits, limits and risks associated with each of them. I do not think that confidence would really benefit from measures that are known to carry non-negligible long-run risks, even if some short-term relief is expected from them. As a way of conclusion, let me shortly consider the progress that has already been made to solve this crisis and list some of the remaining challenges ahead. First, it seems important to welcome the significance of the fiscal stabilization programs many euro-area governments have committed to. As mentioned earlier, this is a necessary step to restore confidence in a sustainable way. Although this is a difficult task, the timely delivery of the promised reforms is necessary. Second, beyond individual policy actions, the recent progress obtained in the design of a common fiscal governance in the euro area is of the essence. Indeed, many important decisions have been taken in that direction: The creation of the EFSF and the ESM or the agreement on fiscal rules and surveillance mechanisms during the Brussels EU Summit on December the 8th and 9th are historical steps in the right direction. Obviously, most of these newly established institutions, rules and processes would have been unthinkable four years ago. This makes me really optimistic about our prospects for restoring stability and growth in the euro area.
The fact that both public and private indebtedness had followed an unsustainable pace of growth over the previous decade then makes area-wide adjustments both necessary and painful. Among the factors that contributed to the excess of the pre-crisis period stands in my view the misleading belief that sophisticated financial engineering was able to achieve close-toperfect risk diversification and market completeness led in fact to excessive risk-taking by banks. This is in sharp contrast with the current situation, in which investors have doubts about even the risk-freeness of sovereign bonds of developed economies. Restoring market confidence is a difficult and potentially lengthy task. That said, all actions that are consistent with the commitment of governments to address national fiscal imbalances and structural impediments to real growth are likely to accelerate this process. Besides, it is clear that nominal long-term anchors are also of the essence to reduce uncertainty and facilitate such reforms. The primary mandate and the best possible contribution of the Eurosystem is precisely to ensure price stability in the medium run. Then, to the extent that dysfunctional financial-markets are likely to jeopardize our ability to maintain stable prices in the medium run, the Eurosystem must intervene. This analysis has motivated our decisions in the past and will continue to motivate future ones. This brings me to the second part of my talk today. 2.