on many fronts. putting the real economy truly center - stage means that we should build such europe that opens up opportunities to innovate and create new businesses and thus jobs. better institutions to prevent and manage crises, including stabilization policies, are no substitute for structural reforms that are needed to improve europe ’ s productivity and real competitiveness. finally, let ’ s recall that eurozone reform is closely linked to the overall future of europe and its union. the values of the enlightenment, which underpin the european social and political model, are now challenged both politically and socially, both from the inside and the outside. in this context the eurozone reform is an essential element of a broader endeavor to strengthen europe. as europeans, we should recognize the urgency of this effort, especially now as europe ’ s duty as a standard - bearer for liberal democracy and multilateral international order has become even more critical than it was still some years ago. 2 / 2 bis central bankers'speeches

unable to predict the timing and scale of the problems that they were about to face. already in september 2007, the british bank northern rock, which specialised in mortgage lending and was dependent on short - term market funding, faced a liquidity crisis, which triggered the first bank run in britain in 150 years. the bank of england had to grant massive liquidity support to northern rock, which was subsequently nationalised. the euro area interbank money market also froze, due to the growing uncertainty, and the ecb had to increase the amount of central bank money on the market by conducting a series of nonstandard refinancing operations. bis central bankers ’ speeches in the united states, the most famous victim of this phase of the crisis was the investment bank bear stearns, whose bankruptcy the us federal reserve ( fed ) prevented with the help of large refinancing operations in march 2008. bear stearns was subsequently merged with another investment bank ( jp morgan ). the financial crisis entered phase two, the systemic phase in autumn 2008. the milestone in this phase was the collapse of the investment bank lehman brothers on 15 september. the message of the lehman collapse was that even a large financial institution can collapse. this immediately raised financial market uncertainty and the lack of confidence to completely new levels globally. the interbank money market, on which banking liquidity was largely based on, came to a virtual standstill. many banks that were dependent on short - term market funding ran into difficulties and had to resort to central bank financing. particularly vulnerable was the banking system of iceland, whose entire business model hit the buffers. the icelandic financial system collapsed in october 2008. it was clear that the drying up of the credit market would cause great damage. one way that central banks responded to the situation was, of course, by using their main instrument, the policy rate. in early november, the ecb began to lower its key interest rates drastically. the interest rate cuts began from a level of 4. 25 %, but within six months the policy rate had already been lowered to 1. 0 %. the united states reacted even more rapidly and drastically – by the end of 2008, the fed had cut the federal funds rate to 0. 25 %. the crisis awareness that arose following the failure of lehman is characterised by the unprecedentedly swift and smooth international cooperation at the point when the crisis escalated. cooperation between central banks, in particular, was very efficient. in europe, banks were hit by the drying