BIS central bankers’ speeches  1  Most of the aforementioned features were shared with other economies, such as US and Japan. The balance sheet recession they describe remains tractable, at least in theory, with a combination of short term economic stimulus, long term commitment to macroeconomic stability, structural reforms, and patience. However, there have been several idiosyncratic issues which set the European experience apart from the other economies. They were manifested into severe public sector problems in several Eurozone countries, widespread lack of trust in institutions and authorities, and the strengthening of centrifugal forces which risked breaking the euro apart. What were the factors that exacerbated the crisis in the Eurozone? While an exhaustive list would be long, I would like to highlight three of them. -  First, the inter-dependence between sovereign credit rating, financial sector risk premia and the real economy was exacerbated by incomplete financial market integration. While the region as a whole suffered from capital outflows, financial integration within EU went in reverse during the past four years. The repatriation of cross-border financial flows created further problems in the Eurozone economies and neighboring region. In fact, the subsequent cross-border deleveraging and derisking has been one of the main crisis propagation channels that has affected eastern European countries, Albania included. -  Second, the divergence in intra-regional economic policies resulted in a divergence of competitiveness within the EU and Eurozone. This accentuated existing intraregional balance of payments issues during the crisis, highlighting the need for long overdue economic and fiscal reforms.

Lastly, there have been several structural measures undertaken, aiming to revive both the EU and countryspecific competitiveness. Among others, these measures include increasing labor market flexibility, reforming the pension system, further liberalizations in the goods and services markets. What remains to be done? While arguably late, I think the policy response within the EU has gone in the right direction and has been rather comprehensive. Nevertheless, further work is required in the future. 2  BIS central bankers’ speeches  I would like to highlight two of these areas. -  First, the reform agenda identified by four presidents (of the European Council, of the European Commission, of the Eurogroup and of the ECB) aims to complement the monetary union with a financial union, a fiscal union, an economic union and some higher degree of political union. This is an ambitious goal, but I am fairly convinced it will be accomplished within a reasonable time-scale. In this context, it is not much a wish list as it is a prerequisite for long term growth. It would indicate to the world that Europe has answered the dilemma about its role in the global economy of the 21st century. -  Second, I think that efforts to increase EU integration should extend to include a deeper cooperation with candidate and potential candidate countries in the Eastern and Southeastern Europe. These economies are very much connected to the EU, from an economic and financial perspective.