2016 ), “ addressing europe's economic and political challenges ”, introductory remarks at tum speakers series / hec debats organised by the technical university of munich, munich, 21 november. 3 see e. g. cœure, b. ( 2013 ), “ global liquidity and international risk - sharing in the post - crisis environment ”, speech at the bank of korea international conference 2013 “ assessing global liquidity in a global framework ”, seoul, 3 june. 4 these figures refer to a sample of oecd countries for which a correlation between gross national savings and investments in percent of gdp is computed for annual data since 1980. 5 see institute of international finance ( 2017 ), february 2017 capital flows to emerging markets, 8 february. 6 price - based measures of global financial integration, for example, present a different picture : international equity market co - movements, for example, remain strong. by some estimates, they remain as high as ever in more than a century. 7 for an overview of this debate, see e. g. cœure, b. ( 2016 ), “ the case for rethinking international capital flows ”, dinner speech, suerf / pse / cepii conference on “ rethinking capital controls and capital flows ”, paris, 15 september 2016. 8 ibid. 9 see rodrik, d. ( 2011 ), “ the globalization paradox : democracy and the future of the world economy ”, new york and london : w. w. norton. 10 the economic literature on fiscal federalism emphasises the trade - off between the benefits of centralisation arising from internalising externalities across jurisdictions on the one hand and, on the other hand, the cost of a 7 / 9 bis central bankers'speeches common policy in the presence of heterogeneity of preferences and economic characteristics. some applications of this framework to the european union suggest that eu involvement may be overextended in some areas and too limited in others. see alesina, a., i. angeloni and l. schuknecht, ( 2005 ) “ what does the european union do? ”, public choice, vol. 123, no. 3, pp. 275 – 319 ; cœure, b. and j. pisani - ferry, ( 2007 ), “ the governance of the eu ’ s international relation : how many voices? ”, in a. sapir ( ed. )

governments may agree on a convergence process ensuring that the benefits of a common policy outweigh its costs. 11 without such convergence processes, neither the european union nor economic and monetary union ( emu ) would have been possible. and the euro area ’ s travails are largely due to lack of effective convergence, both before the financial crisis and since then. an example of the subsidiarity principle is the stability and growth pact, which spells out common rules for the fiscal deficit and debt levels in order to avoid fiscal dominance within the currency union. at the same time, the stability and growth pact leaves space for member states to determine both the composition of government expenditures and revenues and their size relative to the economy and thus to choose from a variety of social models based on democratic deliberation. this point has recently been made also in the debate on globalisation : the power to levy taxes and determine the size and composition of government expenditures has remained in the hands of national governments, despite economic and financial globalisation. whether or not they have been successful is debatable, but this has little to do with globalisation. 12 another common political fallacy about globalisation is the view that international markets flourish if the state is weak. in fact, the opposite appears to be true : international trade has thrived because of the existence of strong states which helped markets to overcome specific risks stemming from cross - border trade, including security risks, transaction costs and the enforcement of property rights13, and also because of multilateral institutions and fora created by these states. likewise, the experiences from the emerging market crises of the late 1990s and the global financial crisis suggest that well - functioning international capital markets require strong financial regulation, both domestically and across borders. in addition to this traditional role of the state, governments also need to ensure that the gains from trade are shared within societies. and in fact, countries with higher trade openness tend to have larger, not smaller, public sectors. 14 governments have acted to mitigate the distributional consequences of globalisation, although they now face issues to which i will turn later. before turning to the economic fallacies about globalisation i would therefore conclude that global markets need to be underpinned by strong states and firm governance. although opinions do differ on the scope of competence of institutions and administrations, carefully crafted structures and networks of national and international bodies and rules can ease the political trilemma. economic fallacies about globalisation it is useful to re - state