For most cross-border mergers, the business case is more difficult to anticipate in the current competitive landscape. Admittedly, too, there are certain cultural, institutional and regulatory obstacles that hinder the emergence of a truly European banking market. The resistance to removing these obstacles largely imply preserving ring-fencing structures at national level, limiting or even impeding the free flow of capital or liquidity across borders. 3/5  In my view, after achieving a significant reduction of risks in the financial sector as well as a complete pan-European decision-making process, it would be time to call for an end to these national ring-fencing supervisory practices, which are detrimental to financial integration and, thus, limit the ambition of the BU as a single jurisdiction. The implementation of the SSM and SRB may be seen as a remarkable achievement. But we must acknowledge that the BU still lacks one of its three main pillars, the European Deposit Insurance Scheme (EDIS). At a minimum, a building needs three pillars to ensure its structural soundness; likewise, I believe that the EDIS would contribute to making the BU more stable, particularly in times of stress, which is in fact when the resilience of structures are tested. Certainly, a fully-fledged mutualised EDIS would have a strong impact on citizens’ trust; but, in addition, a greater degree of risk-sharing within the euro area would also help align financial responsibility with the pan-European decision-making process, already in place in the areas of banking supervision and resolution.

3  The seminal paper on this issue began is Blanchard, O., and L. Summers (1986), “Hysteresis and the European unemployment problem”, NBER Macroeconomics Annual 1986, Volume 1. 4  For more details see speech by Draghi, M. (2014), “Unemployment in the euro area”, annual central bank symposium in Jackson Hole, 22 August 2014. 5  For details on pre-crisis productivity developments see European Commission (2013), “Catching-up processes in the euro area”, in Quarterly Report on the Euro Area, Vol. 12, Issue 1, March 2013. 2  BIS central bankers’ speeches  What type of supply? This relationship between supply and demand, however, rests on the assumption that structural reforms will have mainly positive short-term effects. But this needs some more qualification. Though the long-term benefits of structural reforms are by and large undisputed6, there are different views about the short-term effects in the academic literature. Reforms can be shown to produce two, opposing sets of forces in the short-term. One is contractionary, as reforms lead to lower prices and higher real interest rates. If monetary policy is at the zero lower bound and unable to respond and fiscal space has been exhausted, higher real rates cause the private sector to postpone consumption and investment decisions and GDP to contract.7 The other set of forces is expansionary. As reforms raise expectations of permanent income, firms bring forward investment and households bring forward consumption. Moreover, for households the prospect of higher potential growth increases the likelihood of future employment, thus reducing precautionary savings and boosting consumption today.