, our union needs both : risk reduction mechanisms and risk sharing. as i just said, for crisis prevention to be credible, we should implement fiscal discipline – including the present rules of the stability and growth pact – but we should also have the instruments needed to cushion the effects of asymmetric shocks that may arise suddenly, regardless of all the efforts a member state can make. it is time to forget about ideological trench warfare. let me share with you four areas where practical progress is needed : first, bolstering private risk sharing. the simple and obvious way to achieve this is to build the capital markets union within the financing union that i mentioned earlier. we are still lagging far behind the united states where capital markets are capable of absorbing around 40 % of a state - specific shock. what is more, a genuine financing union would further 2 / 3 bis central bankers'speeches increase the efficiency of monetary policy by ensuring better circulation of liquidity in the euro area. second, edis. we have made significant strides with the first two pillars of the banking union, the single supervisory mechanism ( ssm ) and the single resolution mechanism ( srm ). we still need – and it should be our priority – to strengthen the srm with a sovereign backstop to the single resolution fund and a simplified decision - making process tailored for emergency cases of resolution. now, there needs to be some form of compromise to move forward on the third pillar, edis, as well. a suitable and pragmatic approach could be a first step focused on providing the liquidity needs of the national deposit guarantee schemes, as proposed by the european commission last october. we don ’ t need from the start an integrated european guarantee. third, sovereign debt restructuring. it is legitimate and important to ask ourselves how to make the euro area better able to withstand sovereign debt crises in case they happen. in this regard, enhancing market discipline can be part of the solution – the proposals to set up a sovereign debt restructuring mechanism build on this idea. however, we have to be very cautious and make sure that it does not become part of the problem. when rules are rigid, market expectations may prompt sudden chain reactions or speculative attacks and put financial stability at risk. and nobody should underestimate the “ transition problem ” on the existing debts if such a policy were to be announced. fourth, the institutional architecture of the euro area. if we make progress on the substance ( the three instruments i mentioned ), there is a

david dodge : global economic forces and the need for adjustment remarks by mr david dodge, governor of the bank of canada, to the chambre de commerce du montreal metropolitain and the federation des chambres de commerce du quebec, montreal, quebec, 21 june 2006. * * * since the start of the millennium, developments in the global economy have led to important changes throughout the canadian economy and to serious challenges for many sectors and regions. because nobody can anticipate precisely how the world will unfold, the best we can do is to ensure that our economy is as flexible as possible. what i want to do today is look briefly at how the canadian economy has adjusted so far and talk about what public policies - including monetary policy - can do to promote economic flexibility. let me start by listing the main global developments since 2000. first, china and india have emerged as economic powerhouses. second, global economic growth has been extraordinarily strong. third, we have gone through a period marked by an unusually high amount of monetary stimulus, which central banks are now in the process of reducing. at the same time, we have seen a persistent and growing current account deficit in the united states, mirrored by large and growing current account surpluses elsewhere, especially in asia and among many oil - exporting countries. these developments have had significant consequences for the canadian economy. the strong global growth, especially in china, india, and the united states, has led to sharply higher prices for many of the primary commodities that canada produces. the emergence of china and india has also led to intense competition for many manufacturers, as well as lower prices for various consumer durable and semi - durable goods. the higher prices for many of our exports, coupled with lower prices for imported goods, have led to an improvement in our terms of trade and rising incomes for canadians - particularly for producers of commodities, including metals and energy products. in this environment, we have seen a rapid increase in the external value of the canadian dollar. it is clear that we must all adjust to these developments and be ready to take advantage of the opportunities presented by the strong global economy. of course, adjustment is easier said than done. and it is important to acknowledge that adjustment is often very difficult on a personal level. the adjustments over the past three years have been particularly difficult because of the speed and size of the movements in relative prices. this has been a double - edged sword. on the one hand, some firms are facing