the appetite for that amount of economic integration is there now in europe, among the new generation of leaders? there are more reasons today for the europeans to unite in economic, financial and monetary fields than there were at the beginning of the 1950s, at the time of the first speech of robert schuman. i really think that the structural transformation of the world, the formidable economic success of the emerging countries, of china, of india, of all emerging asia, of latin america, calls for the europeans to unite very significantly. one of the main lessons of the crisis is precisely that europe needs more unity. in my opinion, this is not necessarily perceived spontaneously or communicated appropriately to the public, but i think these are truths that are there. this necessity for europe to unite is recognised more and more in the business sector, by all those who have a direct connection with the rest of the world. i think we had, recently, several examples of european democracies where it was said it was impossible to take some difficult decisions. but after discussions and due reflection, the decision was finally taken in the direction of reinforcing european unity. we are presently experiencing history in the making in europe. all what i know makes me think that no leader, no individual and no country will take the responsibility of going backwards. that ’ s the reason why i ’ m confident in the future of europe. but it calls for a strong sense of direction and for hard work. even those countries where there are deep political reservations, deep political doubts? i ’ m confident for all countries without any exception. how do you respond to those leaders who say “ we ’ re elected, we ’ re not going to be pushed around by markets ”? i think we are proud to live in market economies because they have proved the right way of producing wealth, and all other experiments have proved catastrophic. that said, market economies have to be disciplined. you must have rules. you cannot rely too naively on the spontaneous functioning of markets. central banks were created when it became apparent that it was necessary from time to time to exert some discipline in the market. was not part of the problem leading up to the current crisis that there was almost an irrational belief in the perfect nature of markets and in, for example, efficient market theory? yes. in this respect i have to say that the immediate lessons drawn from the crash of the dotcom bubble were unfortunate. the idea was that financial markets were extraordinarily res

. the longer horizon also anchors short - term interest rate expectations for a longer period, thereby reinforcing the governing council ’ s forward guidance on policy rates. 1 / 4 bis central bankers'speeches the third dimension is optionality : retaining the option to re - calibrate the app if warranted is consistent with the forward guidance on the app. key channels of the app there are two key channels through which the app operates. the first is the extraction of duration risk, which propagates through portfolio rebalancing. the second key channel is the signalling channel on interest rates. the duration risk channel and the signalling channel correspond to the two components of the long - term interest rates through which a central bank can seek to influence the level and shape of the yield curve : the expectations component and the term premium. how does the app influence the term premium? by accumulating a portfolio of long - duration assets, the central bank extracts duration risk from private hands, frees up risk bearing capacity in the markets, spurs a rebalancing of private portfolios towards the remaining securities, and thereby lowers term premia and yields across a range of financial assets. duration extraction is thus the catalyst for the portfolio rebalancing channel, which is the main mechanism by which easing through quantitative interventions is then transmitted further through the economy. now, what matters in particular for term premia is the entire stock of duration which the central bank removes from the hands of price - sensitive investors by taking this stock of duration on its balance sheet. as a result, the continued monetary support from assets purchases is not only provided by the additional net asset purchases, but also by the sizeable stock of already acquired assets and the forthcoming reinvestments. the second key channel is the signalling channel : the expectations component of long - term yields reflects market expectations of the future path of the policy - controlled short - term interest rates. in this respect the sequencing embodied in our forward guidance gives significant strength to the signalling channel. the sequencing firmly anchors expectations for short term interest rates. the governing council expects the key policy rates “ to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases ”. the role and function of money markets for the signalling channel to operate it is essential that the monetary impulses are transmitted through money market rates. in this regard let me make a number of observations. fragmentation first, for monetary policy impulses to be transmitted through