Political life and legitimacy continues to occur mostly at the level of nation-states. This implies that to foster legitimacy we have to act on the two levels the European and the national by giving for instance, the European Parliament a stronger euro area dimension and engaging national parliaments more in euro area discussions. I wanted to highlight the importance of these issues but as I said I will not dwell upon them further. Conclusion Let me then conclude. The euro area was designed in the 1990s and we should not be too critical of the fact that its architecture was influenced by the prevailing economic theory. However, we now have more than a decade of practical experience of sharing a single currency in Europe. It is unacceptable if we do not learn the lessons of that experience. The most important lesson is that, to maximise its benefits, the single currency needs strong common institutions. Strong institutions to supervise and stabilise the single financial market. Strong institutions to guide fiscal policies and preserve budgetary sovereignty. Strong institutions to guarantee competitiveness and encourage sustainable growth. And strong institutions to engage citizens more closely in the European project. In this effort the European and national dimensions of legitimacy must be balanced. Nevertheless, we must also recall that Nations are a construct of man, not a natural reality, meaning that our consciousness and our knowledge are socially constituted. A form of civic community among strangers was somehow created to shape several European nation-states only as late as the XIX century.

Hence, the country would likely turn the table on the ECB, and push for generous liquidity support or supervisory forbearance. From the ECB’s perspective, an effective financial union is a key complement to the single monetary policy. To the extent that it restores the flow of savings between euro area countries, it will support the normalisation of monetary policy transmission and allow us to exit our exceptional measures. But more fundamentally, without integrated capital markets and a well-functioning banking sector, there cannot be a single monetary policy – and this means we cannot fulfil our mandate. Fiscal union The second pillar, fiscal union, is necessary to ensure that fiscal policies are fully commensurate with the requirements of the common currency. The crisis provided prima facie evidence of the sizeable negative spillovers associated with fiscal crises within monetary union. Moreover, it showed the importance of sound fiscal policies for allowing governments to perform their essential functions: countries with weak budgets lose their ability to perform cyclical stabilisation during a crisis. Measures that guarantee solid fiscal policies are therefore a public good – both for individual Member States and for the whole euro area. For domestic citizens, they ensure that the automatic stabilisers will be able to play out in full during a downturn and smooth the  BIS central bankers’ speeches  7  economic cycle. For citizens elsewhere in the euro area, they provide protection against contagion emanating from budgetary decisions over which they have no democratic control.