is often the case with such large projects, the devil is in the detail. i do not want to appear as an inveterate objectionist, even though the institution of which i am a representative is sometimes accused of that role. rather, i am deeply convinced that europe has to get this banking union project right and cannot afford a bumpy start. for this reason, too, a banking union will not be a quick fix for the current crisis. but it can be a major milestone towards a more stable and prosper monetary union and hence instrumental in re - establishing confidence in the euro area. 4. conclusion ladies and gentlemen, a lot went wrong in europe over the past decade, and the crisis has revealed serious flaws in the euro area ’ s architecture. yes, some governments, enterprises, banks and households have wasted the opportunities presented by the euro, but the benefits clearly outweigh the excesses. according to a recent report on europe ’ s growth model published by the world bank, one of europe ’ s most attractive features is that it is a “ convergence machine ”. simply by virtue of being european and enjoying the benefits of european integration, a european country has a better chance of moving to the top of the prosperity ladder than other countries in the world. but we need to get this machine running again, we need to make it strong again bis central bankers ’ speeches and make it more reliable. the task is daunting, often tedious and sometimes sobering. but i am convinced that it can be done and that, ultimately, we shall succeed. the monetary union and the euro are here to stay. thank you for your attention. bis central bankers ’ speeches

epicentre of the crisis. but then, what can explain the vast array of opinions on how to resolve the crisis? as i said at the beginning of my speech, the debate runs along the front lines of one of the most well known trade - offs in economics : the trade - off between efficiency and distribution, or, put differently, between sound incentives and burden sharing. such a trade - off informs the debate at the national level. for example, labour market reforms in the countries at the bis central bankers ’ speeches periphery would lower barriers to entry and hence promote employment, but incumbent employees are taking issue with such reforms because they fear downward pressures on wages or a greater risk of losing their jobs. and the trade - off informs the debate at the european level. on the one hand, there is the desire to strengthen incentives and controls in order to contain risks. on the other hand, there is the desire to share the economic, social and political burdens through mutualising risks. such a tug - of - war between sound incentives and greater burden - sharing occurred in the debate on the construction of the rescue mechanisms, in the debate on introducing eurobonds, in the debate on a true fiscal union, and now it takes place in the debate on a possible banking union. the bundesbank position in these debates has been clear and consistent. sound incentives are indispensable for countering the biases inherent in the euro area ’ s architecture. some burden sharing is necessary, and it is implemented via the rescue mechanisms that grant financial assistance. but if burdens are shared in a manner that distorts incentives even further, no lasting resolution of the crisis will be possible. studies by the bundesbank have shown that, in the euro area, which may be interpreted as a particularly credible variant of fixed exchange rate regimes, usual adjustment mechanisms are less immediate and less harsh than in other exchange rate regimes. through the convergence of short - term interest rates and the nearly unlimited provision of liquidity, the common monetary policy smoothes an otherwise more abrupt adjustment process, which would entail significant costs to the financial system and the real economy. but insofar as normal adjustment forces are suspended, sound incentives need to be put in place to bring about lasting gains in competitiveness and productivity. and given the dimension of existing inefficiencies, the current crisis of confidence and past experience of implementation lag and drag, there is no compelling argument for delaying the necessary adjustments while putting