Although economists were aware of the significance of the above listed for social welfare, financial stability had been in the back burner before the global financial crisis of 2008–2009. With the onset of the crisis, the importance of financial sector came to the forefront and it was understood that the costs will be immense if the instability in the financial sector spreads to the real sector. Therefore, in the period ahead, maintaining macroeconomic stability and financial stability concurrently remains a major challenge for policymakers. New policy tools and new policies might be needed to achieve both stability targets. In this context, I believe that the conference on “Financial and Macroeconomic Stability” will provide a significant contribution to policymakers. Distinguished Guests, Excessive volatility in macroeconomic aggregates, namely production, employment, budget, foreign trade and inflation, might impair the distribution of income and assets, and reduce the welfare of that society. It is therefore of utmost importance to achieve macroeconomic stability and to sustain the welfare of the society. Financial stability is crucial in providing an effective mechanism for the transfer of the economy’s resources from savers to producers. An effectively-functioning financial system will ensure balanced distribution of risks and decrease the susceptibility of the economy to shocks. Otherwise, financial crises will disrupt real sector production and the economy will suffer sizeable loss of welfare. Thus, instability in the financial sector will jeopardize macroeconomic stability.

An independent study carried out for the European Commission concluded in November 2002 to a significant macroeconomic positive impact in the long run of a full integration of European financial markets, not only in terms of GDP, but also in terms of business investment and employment. Needless to say, as a central banker, I attach great importance to financial markets integration: the implementation of the single monetary policy would not have been possible without an efficient and fully integrated money market. A high degree of integration of the securities market is also required because central banks’ credit operations are fully collateralised and rely heavily on the smooth transfer of securities. Moreover, efficient and integrated markets favour a homogenous transmission of monetary policy actions across the euro area. So where do we stand today? I think it is fair to recognise that significant progress has been made already in the integration of European Capital Markets. At the same time, one has to acknowledge that integration is an on-going process, that faces renewed challenges in a constantly evolving environment. Let me elaborate on these two aspects successively. 1. European capital markets already exhibit a high degree of integration  If one stands back and compares the organisation, functioning and structure of European financial markets today with the situation that prevailed five years ago, the magnitude of the changes that already took place is striking, not only in the various market segments but also in their infrastructures: indeed, the euro area already benefits from highly-integrated capital markets.