From an economic point of view, the relevant question is whether the political and institutional framework which governs the euro area is designed in such a way as to ensure bright long-term prospects for the euro area in terms of employment, real growth and, more generally, living standards of its citizens? In this respect, while I see an urgent need for further structural reforms in the euro area, let me emphasise at the outset that I am rather optimistic as concerns the long-term growth and employment prospects of the euro area. Not least as the euro, together with healthy competition among differing policy designs of national authorities, will act as a catalyst for further reform and integration. In my presentation today, I will first briefly address the political and institutional structure underlying the euro area. Secondly, I will discuss some features of the ECB, the institution responsible for an area in which full integration has been achieved, namely monetary policy. Thirdly, I will discuss some of the challenges which need to be addressed to fully grasp the opportunities offered by the single currency, thereby further improving the economic prospects of the euro area. Finally, I shall argue that the unique institutional choice for the euro area brings many advantages and opportunities and thus, if properly handled and carefully further developed, is a very solid fundament for a substantially more dynamic long-term development of the euro area than most observers currently appear to expect.

There are three factors that are key to enhancing our resilience to external shocks. Capacity building: strengthening the economic and financial base The first is strengthening the economic and financial base. A deliberate policy to diversify the economy to achieve a greater balance between domestic and external sources of growth, to avoid excessive concentration in any activity and to reduce over-dependence on any particular market has increased the resilience of the economy. This has required shifting into new areas of comparative advantage and seeking new market opportunities and new areas of growth, while shifting out of those areas where comparative advantage has been eroded. Having flexible labour and capital markets has facilitated this process of adjustment. Of equal importance is the development of a resilient institutional framework and institutions. This includes the promotion of strong private and public institutions. In the public sector, strong institutions can be measured in terms of building efficient and strong delivery systems that promote coordination in the government machinery to provide an enabling environment for operations in the economy. At the same time, sound private sector institutions are crucial. In addition to healthy financial positions, good systems of risk management and corporate governance would ensure better management and a healthy corporate sector. Another important aspect is the availability of timely and reliable financial information and the strengthening of the legal and regulatory framework for enforcement of the laws and regulations. Strong professional organisations can also play an important role to improve and enforce the standards and best practices.