new legislation, policy instruments and institutions put in place to strengthen the governance of the euro area, as we will examine in more detail in the following sections of my speech. as robust as it may be today, the emu remains incomplete. the “ monetary ” component of the emu is successfully developed, as illustrated by the role of the european central bank ( ecb ). however, the “ economic ” component is still lagging behind, with less integration at eu level hampering its ability to support fully the euro area ’ s single monetary policy, but also national economic policies. there is a need to strengthen the political will across the board, among member states, between member states and eu institutions, and restore the confidence of the general public. there should be no complacency about the need to strengthen emu architecture. 1 / 17 bis central bankers'speeches 1. 2 union in diversity first and foremost, we need to remind ourselves that the political economy of the eu concerns a union of 28 member stateswith different economic histories, diverse financial systems, credit and regulatory philosophies. yet, the integration of financial markets and their corresponding regulation have been considered central to achieving a european single market since at least the 1980s. in this context, the governance of eu financial services has gradually moved from the national to the european level under the complementary dynamic of the effective internationalisation of capital. as banking and finance progressively internationalised, eu member state governments have had to open up to pan - european initiatives ; otherwise, it was feared that european economies would become increasingly marginalised in global capital markets. another force that pushed towards european financial integration is a recurrent theme in the history of the eu : crisis - driven regulatory responses, i. e. when member state governments and economic actors look to europe for solutions to comparative problems affecting them all. under extraordinary circumstances such as the recent crisis that the eu experienced, the supranational regulation of financial services represents the best solution to deal with the challenges posed by the internationalisation of capital. allow me here to make a small digression to remind you how important european law, and the contribution of legal experts such as yourselves, is for further integration in the creation of new law based on the two cornerstones of eu action. indeed, any integratory step towards a fiscal and economic union must take heed of the subsidiarity and proportionality principles, which regulate the exercise of powers by eu. more specifically,

long they can actually go. there are a number of concerns including banks ’ profitability, how negative rates may act as an anaesthetic to euro area governments especially in the euro area ’ s southern periphery, taking into account that the fiscal space gained from lower debt service costs may result in a slower implementation of necessary fiscal and structural reforms. policy rate cuts to negative levels have generally been reflected in corresponding declines in money market rates and short - term government bond yields ( see figure 17 ). in turn, the fall in bank wholesale funding costs has helped lower lending rates, but to varying degrees across countries. the decline in rates on new loans has been particularly notable in the eurozone ( vinals et al. 2016, jobst and lin 2016 ). inflation expectations have continued to decline in most economies with negative interest rate policies ( also known as nirp countries ). 13 / 15 bis central bankers'speeches in addition, there are concerns about the political and institutional feasibility of negative rates as their long - term effects are still unknown. most importantly, their effectiveness is put under question during a recession, if this were to emerge in the near future. i would personally, in my professorial hat, prefer to see more qe rather than further negative rates. if this is the case, the next question is where could more qe in the eurozone come from? in other words, does the ecb have the tools for more qe stimulus? well, there are several options. from changing the parameters of the current qe programme like, for instance, buying bonds below the deposit rate, increasing the 33 % issue share limit, dropping the capital key allocation, or even adding new securities to the pool of eligible assets such as bank bonds or equity. let me now turn to the effects of brexit on the dynamics of european integration and indeed offer a southern point of view and, more particularly, make five points from the south on the brexit vote. 3. a southern view on brexit ’ s implications for the eu1 the european union is currently facing crises on multiple fronts ( anaemic growth, high unemployment, persistently low inflation close to deflation, a debt crisis, an ongoing migrant crisis ), but brexit represents the biggest medium - to long - term challenge of all. i will focus here on a couple of rather important points. 14 / 15 bis central bankers'speeches euroscepticism is now a strong sentiment in europe. populi