The rather good economic performance in the euro area on average still conceals individual heterogeneities. [slide] And so, first and foremost, some countries, like France and Italy, need to accelerate domestic structural reforms to improve the functioning and flexibility of their economies. And let me be clear, it is in our national interest: we currently have lower economic growth and employment than some of our neighbours, such as Germany, Spain and the Netherlands, which have succeeded in carrying out the necessary reforms. In order to achieve a “better Europe”, we need to complete these domestic reforms with what I call the “growth triangle” [slide]. It calls, at European level, for two concrete projects, in addition to domestic reforms: a “Financing Union for Investment and Innovation” (FUII) and a collective economic strategy. The first project, to be started immediately, is a “Financing Union for Investment and Innovation”, because the financial crisis has led to a persistent “investment crunch” at the European level. And yet it is not for lack of resources: the euro area has a savings surplus of more than EUR 350 billion, equivalent to more than 3% of GDP. That is huge. Several initiatives are already in place: the investment Plan of the European Commission (“Juncker plan”), the Capital Markets Union and the Banking Union which is now underway; but they do no deliver sufficient results. It is now necessary to make these initiatives converge into the FUII.

The Governor also spoke about the trade-off as part of his speech the “Grand Unifying Theory (and practice) of Macroprudential Policy” available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/the-grand-unifyingtheory-and-practice-of-macroprudential-policy-speech-by-markcarney.pdf?la=en&hash=53A55C800C6B04573DC04FD2F9579079A3503FED 7 See https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultationpaper/2020/cp220.pdf?la=en&hash=133449CBB3D0FDD2B03AC6242C99C3F36A150258 8 The second core principle states that ‘[t]he supervisor possesses operational independence, transparent processes, sound governance, budgetary processes that do not undermine autonomy and adequate resources, and is accountable for the discharge of its duties and use of its resources’ (https://www.bis.org/basel_framework/chapter/BCP/01.htm?inforce=20190101). 6  I would like to thank Matthew Willison, Hugh Burns, Nicolo Fraccaroli and David Swallow for their assistance in preparing these remarks 7  Regulatory independence and financial stability in practice  Does the evidence support the theory that an independent regulatory body with a clear mandate and strong accountability produces better outcomes? At the Bank, Fraccaroli, Sowerbutts and Whitworth (2019) have been researching whether the institutional structure for prudential regulation affects financial stability in practice. They have done this by analysing whether there is a statistically significant association between the independence of the prudential regulator and/or supervisor and financial stability outcomes. The authors have constructed for different countries and over time an index of regulatory-supervisory independence. The index combines three aspects of independence: institutional; regulatory; and budgetary. The definitions of these aspects can be found in Table 2. Table 2: Definitions of aspects of independence captured in the Regulatory-Supervisory Independence index Aspect of independence  Definition  Institutional  This captures the involvement of political bodies in the appointment and dismissal of the head of the regulatory agency, as well as length of their term.