The recent reforms to strengthen the euro area fiscal framework – the so-called six-pack and the fiscal compact – are welcome and go in the right direction. But they remain within the logic of the Maastricht Treaty where responsibility for fiscal policies is exclusively in national hands. This creates an inherent credibility problem, as for fiscal frameworks to be fully credible, they have to enforceable. This is impossible without a further and deeper sharing of budgetary sovereignty. This could be achieved by giving European institutions greater competence to effectively compel euro area Member States – in a graduated manner if and when the situation deteriorates – to take the necessary fiscal policy decisions. This would correspond to a further sharing of national sovereignty. But for both weaker and stronger countries, it is in fact an opportunity to regain substantive sovereignty as opposed to formal sovereignty. For the weaker countries, measures that put the soundness of their fiscal policies beyond doubt will allow them to be fully sovereign, in the sense that they can use fiscal policy in its vital economic stabilisation role and take free decisions about taxes or types of expenditure without fear of excessive discipline from financial markets. For the latter, sharing sovereignty at the European level will allow them to effectively protect their domestic economies from spillovers from the rest of the euro area. Moreover, they will no longer be placed into situations where they are de facto forced into taking decisions to avert imminent catastrophe.

As I have discussed previously, important research by Stanford economist Raj Chetty and his co-authors has shown that intergenerational income mobility in the United States—a child’s chances of moving up in the income distribution relative to his or her parents—has remained stable over the past half century.1 However, because of the increase in income inequality and stagnant or declining incomes for the least well-off, the consequences of being born to low- versus high-income 2/3  BIS central bankers' speeches  parents are greater today than in the past. These trends have contributed to a steady decline in “absolute” upward income mobility in the United States, as defined by the share of children who earn more in real terms than their parents. This fraction has fallen from 90 percent to 50 percent over the past half century. Recent work by Chetty and his co-authors has investigated the importance of higher education in achieving upward mobility. They find that many highly qualified lower-income students do not attend selective colleges, while those low- and middle-income students who do—despite facing greater challenges—fare almost as well as affluent students who attend the same colleges. Their research also indicates that some colleges are better engines of upward income mobility than others, and that colleges that offered the largest number of low-income students pathways to upward mobility have become less accessible to them during the 2000s. As a result, highereducation’s contribution to increasing intergenerational mobility has diminished. It is unclear why access has fallen to colleges with relatively high mobility rates.