But to innovate, in digital technology, or in energy transition for example, companies need to be able to take more risks, which requires more equity financing, over the long term, rather than debt financing. The euro area is seriously lagging behind in this respect: equity capital amounted to only 73% of GDP in 2017, compared with 123% in the United States. As for resources, let’s take what is often a difficult debate – on Germany’s substantial surpluses – and transform it into a positive: we have abundant savings in the euro area. In order to match resources to needs, I propose a European-level “Financing Union for Investment and Innovation", which would better channel the EUR 350 billion savings surplus into equity financing and innovation, in digital or energy technologies. This Union should bring together existing initiatives, and as a priority, the Capital Markets Union, but also the Banking Union and the Juncker Investment Plan. The Capital Markets Union requires concrete progress on several fronts: amending accounting rules, taxes and insolvency laws to facilitate cross-border investment, notably in equity capital; and developing pan-European long-term savings products. Within the Governing Council, and together with my colleague Jens Weidmann, President of the Bundesbank, we find it most regrettable that the Capital Markets Union is currently being overlooked in political discussions on enhancing the euro area. My second idea to make progress in Europe is to start with the quality of public spending and give priority to investment and expenditure for the future.

Regulations should ideally be worked out in consultation between the legislators and the supervisory authorities and the central banks in order to facilitate the different roles played by the authorities in promoting financial stability. I would like to emphasise that there is no contradiction between an increased significance for financial transactions and stable financial systems, provided that there are good opportunities to assess the realism and risks in financial commitments. The review of the capital adequacy rules for banks now being prepared is a good example of how the overall purposes or rules to maintain financial stability can be combined with good scope for individual banks to apply the regulations in a way that is effective for them. As the banks are enjoined to better monitor their own risks, a capital requirement that is adapted to their risk exposure is achieved de facto, without a need for detailed provisions in individual cases. This also builds into the system an assurance that fundamental stability can be maintained within the system without unnecessary encroachment on the efficiency of the financial sector. An efficient monitoring of institutions and markets is central to being able to assess the risk of tensions that can nevertheless arise if over-investment financed by loans leads to financial bubbles and if regulations are abused. In particular, when the regulatory framework is made more general in character, great demands will be put on having sufficient resources and good competence at the authorities concerned in order to carry out the monitoring in a well-informed way.