percentage points of gdp between 1999 and 2009. the euro area is a vast continent of more than 331 million citizens. by population size, it is comparable with the other large economy of the developed world, namely the united states, with a population of 310 million. in terms of economic output, the euro area is second only to the united states. it accounted for about 20 % of world output in 2010, twice the share of japan ( about 10 % of world output ), and somewhat less than the united states ( about one - quarter of world output ). second, the euro is a stable and credible currency. for over 12 years now, the european central bank – together with all national central banks – has been delivering what it is expected to deliver : price stability in the euro area as a whole over the medium - term, with an average annual inflation of less than 2 %, but close to 2 %. since we are in kiel, let me add that in germany the average yearly inflation has been 1. 5 %, which is a better result than for any such 12 year period over the last 50 years. bis central bankers ’ speeches we have thereby been safeguarding the euro ’ s purchasing power. this has been achieved despite several headwinds to the european economy : oil prices went up ; the internet bubble burst ; violence and wars have raged in some parts of the world ; and starting in mid - 2007 we had to cope with the most severe global financial crisis in over 60 years. taken as a whole, the euro area performed soundly also when looking at other macroeconomic indicators, or comparing with other large developed economies. adjusted for differences in population growth, per capita gdp growth in the euro area over the last decade has been almost the same as in the united states, at about 1 % per year. the dispersion of real gdp growth rates across euro area countries is comparable with the equivalent dispersion across u. s. states. for instance, the difference between the fastest and slowest - growing u. s. states is not of a markedly different order of magnitude as that between euro area countries. overall employment in the euro area increased by 14 million during the first twelve years, compared with a rise of about 8 million in the united states. and the overall yearly public finance deficit in the euro area is presently about half that in the united states or in japan. the imf projects indeed the euro area ’ s fiscal deficit to reach 4. 4 % of gdp

. in europe, the crisis evolved and morphed into the sovereign debt crisis, making the sovereignbank nexus even more evident. to safeguard financial stability, countries were exposed to risks that in certain cases were not compatible with the sustainability of their public debt. as a result of the growing discontent that followed, to reduce the risk of moral hazard, sever the bank - sovereign doom loop and protect the taxpayer from shouldering private sector losses, there was a strong impetus against using public money in establishing a safety net for the financial system. bail - in principles in resolving banks prevailed, and there was a general aversion to bailout provisions. the post - crisis financial sector reforms were thus designed to strengthen financial stability by focusing on improving banks ’ resilience, ending too - big - to - fail, breaking the bank - sovereign loop and reducing financial fragmentation. efforts went into developing a harmonised regulatory framework, with stricter requirements on capital and ( private ) loss - absorbing capacity to protect taxpayers, while reinforcing risk prevention and reduction. 2 / 5 bis central bankers'speeches in the euro area, member states launched the first steps of the banking union and its institutions – the single supervisory mechanism ( ssm ) and the single resolution mechanism ( srm ) – but the political will to complete the architecture has waned in recent years with policy - makers focusing excessively on the ‘ risk reduction v. risk sharing ’ debate. currently, the banking union is missing critical elements – a fully - fledged european deposit insurance scheme ( edis ), a backstop to the single resolution fund and the provision of liquidity in resolution – which jeopardises its fundamental benefits. in this incomplete setup, banks are today ‘ european in life but national in death ’. supervisory and resolution decisions are mostly taken at the european level, but the ensuing consequences still lie with taxpayers at the national level as recent cases have highlighted. this may have a potentially serious impact on national budgets, as the ultimate guarantor of financial stability remains national. in view of the mismatch between european oversight and national liability, the different stakeholders ’ objectives and interests are unaligned. it is important to consider who is actually looking after financial stability. looking back to recent cases of banks under stress, we need to ask ourselves what political landscape we would have today, had certain authorities not acted the way they did in order to preserve financial stability. few things can be more destructive to citizens ’ trust in the european institutions