ti 11 – 054 / dsf 18, duisenberg school of finance. for more on this point see speech by peter praet on “ repairing the bank lending channel : the next steps ”, at european macro conference, london, 17 november 2014. bis central bankers ’ speeches but limited risk - sharing within the euro area is not just about banks ; it also reflects our relatively incomplete capital markets, and in particular equity markets. those markets are the most effective for absorbing losses. yet only 44 % of equity issued in the euro area is held by other euro area residents. 10 so, if we are to deepen private sector risk - sharing in the euro area, we urgently need to address the barriers to capital market integration. this is no doubt a complex issue as it extends into multiple aspects of national law. 11 but if we do not want a transfer union, then we have to be consistent and establish an environment where other mechanisms can work. this means, first, advancing with the agenda of the new commission president to establish a genuine capital markets union in europe. and second, establishing a genuine economic union in parallel. if countries are to attract capital and benefit from financial risk - sharing, then it has to be attractive to invest there. and this can only be achieved if, over the medium - term, all countries have sufficient adjustment capacity and growth prospects. yet even with full implementation of these unions, we could still not call emu complete. we also have to acknowledge the crucial role that accrues to fiscal policies in a monetary union. national fiscal policies that can act counter - cyclically a single monetary policy focused on achieving euro area price stability cannot react to shocks that affect only one country or one region. and we do not have a federal budget that can respond instead, as in the us for example. so, for as long as this situation persists, it is absolutely essential that national fiscal policies can perform their macroeconomic stabilisation role alongside monetary policy, and react whenever a local shock occurs. fiscal policies are in fact particularly relevant for us, as a recent study demonstrates that 47 % of an unemployment shock is absorbed by the automatic stabilisers in the eu, compared with only 34 % in the us. 12 for national fiscal stabilisers to be able to play out in full, sovereign debt has to act as a safe haven in times of economic stress. if it instead acts like private debt, and borrowing costs rise under stress, governments ’ market access

/ 19 bis central bankers'speeches maintaining the medium - term inflation goal as the guideline for households, firms and market participants in forming expectations also requires a consistent communication strategy, especially when the near - term track record of inflation outcomes has deviated from the objective. in part, this communication strategy is anchored by our forward guidance on policy measures, so that everyone understands that the conditional future policy path supports convergence to the aim. it is also supported by demonstrating agility, with the central bank communicating that it stands ready to adjust its policy measures at any time to avoid undue delay in returning to the inflation goal and combat any adverse shock to inflation dynamics. it is also crucial to the successful anchoring of inflation expectations that the central bank shows it is a learning organisation that is committed in its search for the most effective policy tools in delivering its mandate. this general principle is especially relevant during phases when economic and financial conditions pose new challenges and require novel policy responses. 16 / 19 bis central bankers'speeches whether through innovations such as the outright monetary transactions programme during the sovereign debt crisis or through the package of innovative policy measures that have been launched in recent years, the ecb has shown itself to be creative and proactive in responding to new challenges. in common with other central banks, the ecb must always be open to new ideas and new methods, drawing from internal and external research and examples of best practice from around the world. of course, not all new ideas withstand sustained scrutiny, but the exploration of new methods and formulations is essential for successful performance. for instance, albeit with an orientation to the specific conditions of the us economy, the academic contributions to the june conference at the federal reserve of chicago show the vibrancy of current international research on meeting the challenges of low inflation. some of these themes were also identified in president draghi ’ s recent sintra speech. there should be no doubt that the ecb is committed to ensuring that our monetary policy is built on frontier - level and robust theoretical and empirical analysis. conclusions together with the extended nature of macro - financial adjustment in the wake of a major financial crisis, we have seen a substantial downward shift in the realisation of shocks to inflation in recent years. in the context of the euro area, the ecb has been active and creative in deploying nonstandard measures, in addition to extending the range for the policy rate into negative territory. our assessment is that this policy package has been effective and further easing can be provided if