. i agree with jaime caruana, the general manager of the bis, who recently said, “ the asset quality review is a great opportunity to spur the necessary balance sheet adjustment. this chance must not be missed. ” the banking union closes a vulnerable gap faced by emu in helping to strengthen the financial system. however, the banking union is not sufficient to strengthen the institutional architecture of emu. bis central bankers ’ speeches rather, we need a fundamental reform of the emu framework. and this is the third challenge that has to be met to make emu more resilient. let me elaborate on this point. the implementation of the maastricht framework was not able to save the euro area from the crisis. one of the underlying reasons for this insufficiency is that the rules were too strongly focused on fiscal policies, while their implementation was too weak. it should be kept in mind that germany and france were the driving forces behind the stability and growth pact reform about a decade ago which turned the pact into a toothless tiger. with hindsight, they scored an own goal with their efforts. another flaw in the framework was the restricted credibility of the no bail - out rule. if the markets had believed in the rule, we would not have experienced such a strong convergence of sovereign bond yields as we saw prior to the crisis. when the emu framework was established in the early 1990s, the risk of contagion among euro - area member states was clearly underestimated. financial markets were significantly less developed at that time. the credit default swaps market, for example, did not even exist back then. that may help to explain why fiscal firewalls were not deemed necessary when the emu framework was established. while the rescue measures that were established later, such as the efsf and the esm, managed to contain the fallout somewhat, they weakened the principle of individual responsibility. fiscal decision making has essentially remained national, while liabilities have been partially mutualised. in other words, the balance between liability and control has become lopsided. this balance, however, is fundamental to the stability of the monetary union. but how do we restore that fundamental balance, and put monetary union on a more solid footing? in principle, there are two options. the first way is to create a genuine fiscal union ; the second way would be to confirm the maastricht framework, which essentially means making the principle of individual responsibility work better. the first

financial system with sufficient loss absorption capacity and one which is not too closely tied to the government. the so - called sovereign - bank nexus is a huge obstacle to permanently overcoming the crisis in the euro area. during the crisis, many banks, notably in the euro - area periphery, raised their exposure to domestic government bonds ; in doing so they tied their fate even more closely to that of their national government. this development was assisted by the preferential regulatory treatment of government bonds. it includes the zero risk - weighting of government bonds issued in local currency and the lack of exposure limits. in order to strengthen the banking union and the monetary union, i believe we need to end this preferential treatment of sovereign debt over a reasonable period of time. sovereign bonds should be adequately risk - weighted, and exposure to individual sovereign debt should be limited, as is already the case for private debt. 3. conclusion ladies and gentlemen, the french writer francois fenelon said, “ the more you say, the less people remember. ” moreover, i promised to be brief. so let me conclude. according to econometric studies on the history of world cup football tournaments, the advantage the home team has is statistically significant – no surprises there. looking ahead to tonight ’ s match, this is bad news for the croatian team, since it is playing against the host country of the world cup. it is further shown that a positive relationship exists between a country ’ s population and its performance in world cup tournaments. so these statistics are against croatia, too. what ’ s more, brazil leads the world cup all - time table, while croatia is ranked 27th. brazil is the favourite to win the competition. on the other hand, football is incalculable. you never know how a match is going to end. that ’ s what makes it so appealing. there are plenty of surprises in the history of world cup football tournaments. i remember, for example, when germany was beaten 3 – 0 by croatia in the quarter final of the 1998 world cup in france. so there are reasons to be optimistic. pope john paul ii said, “ amongst all unimportant subjects, football is by far the most important. ” but even if football is basically unimportant, as john paul ii claimed, it is nevertheless enjoyable for the players and it entertains the spectators greatly. in contrast to that, the resolution of the crisis in the euro area offers an enjoyment factor of close to zero and