or why did we raise rates by 50 basis points rather than 25? inevitably, the answers to these questions involve an element of judgment. but the truth is that the answers are not very important in the medium term. rather, it is the average level of interest rates that matters. have we allowed them to stay too low and so encouraged the build - up of an inflationary process, or have we raised them too high and so set in train a contractionary or deflationary process? these are the important questions, and any judgment on them must be based on the medium - term performance of the australian economy. this may not be a simple task, but i would suggest that a favourable judgment would require that the macro - economic performance of the australian economy be better than in earlier decades, and that it stand up well in comparisons with the experience of other countries over the same period.

central banks have shown that they are willing to accompany this advance, by continuing to “ produce ” the necessary confidence. but confidence is short - lived in the absence of real progress. the handling at the beginning of this year of the cyprus banking crisis, which was only resolved after difficulties of coordination between european and national authorities had emerged, further underscored the importance of the banking union project for interrupting the spiral between sovereign debt and the conditions of banks and credit. the creation of a single supervisor, in which the ecb and the national authorities play a pivotal role, is the first step ; it must be completed by a common blueprint for the resolution of banking crises and a common form of deposit insurance. beyond banking union there must be the prospect of fiscal union and, ultimately, political union. in an interview he gave to la repubblica on 6 october 2008, padoa - schioppa noted that “ there is more bitterness than satisfaction in witnessing a prophecy come true. at the beginning of the euro i spoke of the dangers of a ‘ currency without a state ’. it is clear that we needed more of a european state, not less of a european currency : without the euro, europe would now be living a catastrophe. one reason for the lack of credibility of national politics is that it keeps on giving people the illusion that national powers are capable of tackling issues ( energy, climate, finance, security, migration, primary goods ) which are not national, but continental and global. ” these words, spoken before the outbreak of the sovereign debt crisis, are highly relevant. it is necessary to further increase the coordination of economic and structural policies and the incentives for reforms, to shift from an intergovernmental form of management based on the peer review of national policies to the formulation of truly common policies. the scope of the project for a common euro - area budget must be defined as well as the timeframe for its implementation. economic and political reforms are not interdependent : confidence in the outlook for economic and monetary union would benefit greatly from significant new steps towards political integration, including on a sectoral basis. in an essay written forty - five years ago ( “ tecnologia ed economia nella controversia sul divario tra america ed europa ” ) nino andreatta had already stressed the importance of a serious assessment of the “ adverse consequences of a plurality of national government purchasing policies, which encourage an inefficient multiplication of