to npl volumes ( and in building up buffers of liabilities to be used in a crisis ). on the other hand, a situation is accepted whereby a disorderly liquidation is the only possible outcome for the crises of small and medium - sized intermediaries which, like most european banks, are not subject to resolution ( albeit – it must be noted – they are required to contribute to the single resolution fund ). the recent suggestions from germany on the completion of the banking union is a welcome development in that it shows willingness to keep the dialogue open. however, they fail to address some of the issues i just mentioned. banking risks are once more exclusively identified with npls and sovereign exposures. moreover, when considering a revision of the prudential treatment of the latter, there is no mention of the need to introduce a european safe asset, which is particularly at odds with the frequent references made to the us model, where the role of federal debt as a safe asset is paramount. an adequate fiscal capacity and the implementation of the capital markets union if sovereign and bank risks management is a source of concern, turning to the state of play of discussions about the fiscal union and the implementation of the capital markets union will provide little consolation. monetary policy was the sole line of defence against the risk of euro area financial fragmentation during the sovereign debt crisis and against the risks of deflation that emerged in the years thereafter. the ecb ’ s governing council demonstrated its readiness to use all of the instruments available and, if necessary, to introduce new ones to pursue the objective of price stability. it has been largely successful, but its actions could have been even more effective had they been accompanied by other economic policies. inflation in the euro area remains at levels that are still too low, and these low levels are pushing down short - term inflation expectations once again. the risk of a de - anchoring of medium - to long - term expectations has re - emerged. the governing council response has been timely, appropriate and proportionate. but once again we are seeing that to make the fullest possible use of the expansionary potential of monetary policy measures, other policies should move in the same direction. fiscal policies that support economic activity in the euro area can deliver a faster return to price stability. to ensure sustained higher growth, reforms are needed to remove any obstacles to development, foster innovation and help modernise the productive system. acting in isolation, monetary policy can do nothing but continue along the path of “ non -

. europe must remain an anchor of stability in a world that appears ever more unstable and politically unpredictable. the introduction of a safe asset in the euro area is a clear and immediate objective. it is a technical endeavour, but it is also the common denominator to the three unions ( banking, capital markets, fiscal ) that must flank monetary union. by partly replacing national government bonds, a european debt instrument could help to diversify the sovereign exposures of financial institutions. it could reduce the risk of flights to safety by investors in times of market tension and enable the financial market to play an effective role as shock absorber, thereby also enhancing the effectiveness of monetary policy. it could be an instrument for funding shared automatic stabilisers within a common fiscal capacity. as i have said, it is possible to design mechanisms that enable a safe asset to be introduced with the necessary safeguards against the risk of opportunistic behaviour. but aside from the rules, the essential requirement for the viability of this solution lies in a renewed and convinced commitment by all to the european project and a willingness to pursue common solutions for common problems. grafica a cura della divisione editoria e stampa della banca d ’ italia