one should not read too much into the differences in quarterly growth, but rather place them in a medium - term context. if growth is back, shouldn ’ t the exceptional measures taken during the crisis be withdrawn? we need to acknowledge that the speed, scope and boldness of the decisions taken by the central banks, on the one hand, and by the governments and parliaments, on the other, have allowed us to avoid a formidable depression. in particular, without this bold and swift reaction by central banks, and notably by the ecb as early as 9 august 2007, the systemic liquidity crisis would have spread across the industrialised countries, and then across the globe, and it would have been grave. i can say the same thing about the actions taken by the public authorities. the budgetary positions are much more diverse than one may think. some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing their credibility. however, all countries must have a budgetary strategy that is seen as being credible in the medium term by households, businesses and investors. the success of the recovery in europe rests on the confidence of households and businesses. if they do not have confidence in the sustainability of public finances in the medium to long term, they will consume less and invest less. the success of the recovery in europe depends on the confidence of investors in the creditworthiness of sovereign issuers. if this confidence is lacking, investors will require higher market interest rates, which would penalise both the public and private sectors of the country concerned. is the stability and growth pact still meaningful, with deficits that are approaching 10 % of gdp? i have always said that in a single currency area which is not a political federation, the stability and growth pact is essential for the stability of monetary union. we are living in difficult times. it has been necessary to take bold measures to avoid a depression. it is essential to get on a credible path towards fiscal consolidation in 2011 at the latest, as has already been decided by the european governments. we say loud and clear to all the countries concerned : “ follow the stability and growth pact to the letter. be aware that if you are not credible in consolidating public finances in the medium term, you will hamper your recovery already from today. ” you advocate policies of budgetary consolidation, but at the same time france is choosing to issue a large bond … the government deficit problem

integration and capital markets and i am looking forward to see more analysis on this issue. 2 / 5 bis central bankers'speeches additionally, we need to make the banking union unassailable to the challenges posed by the departure of the u. k. from the european union, both in terms of resilience and level playing field. opportunities for regulatory arbitrage and possible concentration of systemic risk at a national level would lead to market fragmentation and thus threaten financial stability. while prudential supervision in the euro area is now entrusted to the ecb which minimizes these risks, market activity is subject to national supervision and oversight. the risks are likely to increase with brexit, when activities of financial institutions could be reallocated across the eu. 5 the ecb stands ready to technically support a smooth transition for banks choosing to move to or reorganise their activities within the euro area in the context of brexit. the ecb will ensure that all banks operating in the euro area meet equally high supervisory standards, thus ensuring the safety and soundness of the european banking system. in this context, the borderline between the banking system and capital markets may become important, in particular when capital market participants or non - bank intermediaries fulfil typical bank functions. appropriate regulation and supervision would have to ensure that similar risks are treated similarly and that regulatory arbitrage is avoided. capital markets union supports banking union i will now turn to the synergies running in the opposite direction and elaborate on how capital markets union supports banking union. the very essence of the argument is that more integrated and jointly regulated capital markets would also support cross - border activities and resilience of banks. but let me be more specific. firstly, in a significantly more integrated capital market, banks would no longer need to develop local expertise for each national capital market. they could exploit cross - border economies of scale more easily by offering similar or even the same products and services in another member state. by operating in a larger, integrated market, banks would likely increase the cross - border holdings of assets and be able to build larger and more diversified collateral pools for securitised products and covered bonds. the former effect could also contribute to a significant reduction of the sovereign bank nexus. secondly, banks could also benefit from larger investor bases for their capital - market related funding instruments. another possible side effect for banking union could be that deeper, more integrated and efficient markets for certain assets, such as non