an early stage. in the case of non - adherence to agreed fiscal and economic rules, sanctions will be applied in a more automatic manner to reduce the potential for political interference and delay in the process. further improvements are currently under consideration, such as the mandatory submission of draft national budgets to the group of euro area finance ministers – the so - called “ eurogroup ” – for vetting before those budgets are submitted to national parliaments for adoption. the vetting should ensure that divergences from the fiscal rules can be identified and corrected at a very early stage. moreover, earlier this year, 25 out of 27 eu member states signed the treaty on stability, coordination and governance in the economic and monetary union, more generally known as the fiscal compact. the compact further improves the emu framework by introducing a cyclically adjusted balanced - budget rule which the participating countries need to transpose into national legislation. finally, a temporary crisis resolution mechanism was created, the european financial stability facility ( efsf ), which will remain active until july 2013 despite being replaced by a permanent organisation this autumn, the european stability mechanism ( esm ). with a combined maximum firepower of €700 billion, these two mechanisms will help to build effective firewalls to stem contagion from the crisis. what has been achieved so far is impressive. prior to the crisis, very few would have expected that member states would reach a consensus on such fundamental changes in the way emu works. but these changes are not enough. emu now needs a longer - term vision to confront its challenges. bis central bankers ’ speeches 3. 3. the way ahead – deeper integration in order to restore confidence, policy - makers in the euro area need to resolutely push ahead with fiscal consolidation, structural reforms to enhance competitiveness and european institution - building. recently, the president of the european council, in close cooperation with the presidents of the eurogroup, the european commission and the european central bank, put forward proposals for a genuine emu. the four presidents are proposing that a genuine emu should be built on integrated frameworks for budgetary policies, economic policies and financial market policies, which in turn must be underpinned by greater democratic legitimacy and accountability. when we look at the options to establish budgetary policies in a monetary union, and exclude any uncoordinated conduct of fiscal policy by member states, three possible models come to mind. first, there could be a fully - fledged fiscal union

6 - month and 12 - month refinancing operations mature. overall, the current monetary policy stance remains accommodative. monetary policy will do all that is needed to maintain price stability in the euro area over the medium term. this is the necessary and central contribution that monetary policy makes to fostering sustainable economic growth, job creation and financial stability. all the non - standard measures taken during the period of acute financial market tensions, referred to as “ enhanced credit support ” and the securities markets programme, are fully consistent with our mandate and, by construction, temporary in nature. we remain firmly committed to maintaining price stability over the medium to longer term. the monetary policy stance, the overall provision of liquidity and the allotment modes will be adjusted as appropriate. accordingly, the governing council will continue to monitor all developments over the period ahead very closely. let me now explain our assessment in greater detail, starting with the economic analysis. after a period of sharp decline, euro area economic activity has been expanding since mid2009. euro area real gdp grew strongly on a quarterly basis, increasing by 1. 0 % in the second quarter of 2010, supported by ongoing growth at the global level but also in part reflecting temporary domestic factors. recent data and survey evidence generally confirm the expectation of a moderation in the second half of this year, both at the global level and in the euro area. nevertheless, while uncertainty still prevails, they continue to indicate a positive underlying momentum of the recovery in the euro area. ongoing growth at the global level and its impact on the demand for euro area exports, together with the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system, should continue to support the euro area economy. however, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors and labour market prospects. this assessment is also reflected in the september 2010 ecb staff macroeconomic projections for the euro area, according to which annual real gdp growth will range between 1. 4 % and 1. 8 % in 2010 and between 0. 5 % and 2. 3 % in 2011. compared with the june 2010 eurosystem staff macroeconomic projections, the range for real gdp growth this year has been revised upwards, owing to the stronger than expected rebound in economic growth in the second quarter as well as better than expected developments over the summer months. for 2011 the range has also been revised upwards