the “ why " : greater stability, to counter the risk of a new crisis befalling an unprotected euro area ; and greater growth, to catch up our past lag on the united states and finally treat the fatal disease of mass unemployment in europe. but how can we achieve this shared objective? we should trigger four accelerators : a macro accelerator, which would consist of a collective economic strategy shared by all euro area member states ; a micro accelerator, which would take the form of a financing union for investment and innovation, going beyond the cmu ( capital markets union ) ; a fiscal accelerator, which would draw on a euro area budget. the fourth is not an accelerator in substance, but rather a “ facilitator ” for the first three : on institutions, a euro area finance minister and parliament. these accelerators would contribute to the functions of economic policy, as described by musgrave : 2 allocation, stabilisation and distribution. the allocation function aims at making sure that resources are used in an efficient way. this would obviously be the role of the micro accelerator, but also of the fiscal one – through the financing of european common goods. the stabilisation function consists in the smoothing of the cycle and cushioning of the impact of crises, and this could be ensured mainly by the macro accelerator, but also by the micro one, thanks to enhanced private risk sharing, and possibly by the fiscal one. finally, the distribution function is to foster an equitable sharing of income. this role could possibly fall to the fiscal accelerator but its implementation would require increased trust and greater economic convergence between euro area member states in order to avoid a “ transfer union ” which would 1 / 4 bis central bankers'speeches be a one - way budget : in that case, i would understand german fears. so these four accelerators are needed, but this does not mean they all have to be implemented at the same time. the latter two accelerators, fiscal and institutional, would indeed require treaty changes, unless they were to be very limited. however, this must not stop us from taking steps straight away on the first two accelerators, macro and micro, on which i will insist today. i would like to share with you some personal reflections – useful for the proposals that the european commission will make in december and for our debate today. to be more specific, i will focus on one part of each of these two accelerators, where progress can be made quickly : i will

. by this i do not just mean right in a moral sense. for sure, occupy have touched a moral nerve in pointing to growing inequities in the allocation of wealth and incomes globally. the 99 % certainly agrees. but so, more interestingly, do a high and rising share of the 1 %. yet it is the analytical, every bit as much as the moral, ground that occupy has taken. for the hard - headed facts suggest that, at the heart of the global financial crisis, were and are problems of deep and rising inequality. we have seen, first, inequality - induced crisis and, latterly, crisis - induced inequality. the 99 % have faced double - jeopardy. let me explain why. the up - escalator globalisation has conferred many benefits to the poorest in the world and narrowed global inequality. but it is well - known that income distributions within many advanced economies became increasingly skewed in the decades prior to the crisis. there was no single cause of this rise in inequality. longer - term structural factors, such as dispersed levels of educational attainment, were clearly a key factor. bis central bankers ’ speeches but so, too, were financial factors. james galbraith ’ s recent book on inequality and instability argues that the biggest single cause of rising levels of inequality in the us was the asset price boom which commenced in the early 1990s. this rising tide of asset prices added to aggregate wealth. but it did not lift all boats. the asset rich, in particular the owner - occupying rich, became a lot richer. meanwhile, the assetless and indebted fell further behind. in other words, the pre - crisis asset price bubble acted like a regressive tax. as raghu rajan describes in his book faultlines, the response to this inequality problem, in the us but elsewhere too, was simple and, on the face of it, brilliant. it was to make assetholders and owner - occupiers of us all. but for the majority there was one small problem : these assets had to be financed with debt. so what followed was an era of ultra - cheap credit globally – the heineken era, in which credit reached the parts of society it previously had not reached. levels of debt, in particular among households, rose pretty much exactly in line with levels of inequality. rising credit meant expanding bank balance sheets. to maintain this expansion, banks began to manufacture new financial products, slicing and dicing