can build confidence in the euro area in the near term. but only actions by governments can secure confidence in the euro area over the longer term. in particular, governments need to work together to establish a stronger institutional structure for the euro area. bis central bankers ’ speeches this process began in june this year with what has been called the “ four presidents ’ report ”. that report – of which i am a co - author – identified four key pillars on which a stable and prosperous monetary union should be built. these pillars are financial union, fiscal union, economic union and political union. in the near term, the most important pillar is financial union. financial union is essential in a single currency area where cross - border capital flows can lead to credit booms and other imbalances – and where the negative effects of a bust can spread rapidly to other members. one essential part of financial union is a single banking supervisor. as you know, the european commission has recently proposed that the new supervisor should be based at the ecb. this is important to ensure consistency across the euro area and to prevent regulatory capture. day - to - day tasks, however, would remain with national supervisors who have the competence and resources to implement them. but financial union does not have to imply the pooling of deposit guarantee schemes, an issue that i know is of concern in this country. organising and funding deposit guarantee schemes can remain a national responsibility, with comparable effectiveness. in the longer term, all four pillars are equally important. they are the bedrock for the enormous potential of the single currency for europe ’ s citizens. completing economic and monetary union would give citizens greater security against any future crisis. it would create the foundations for sustainable growth and employment. for all citizens of the euro area, it is therefore essential that europe ’ s leaders stay on course. thank you for your attention. bis central bankers ’ speeches

relate to diverse but interrelated issues, such as trade integration, business cycle synchronisation, financial integration, structural reforms in product and labour markets, as well as inflation persistence and inflation differentials. i believe that the quality of the papers to be presented and the impressive group of discussants, chairpersons and panellists will contribute to fruitful debates. looking at the titles of the various sessions of the workshop, i would like to share some thoughts with you on three specific topics. the first relates to the consequences of market integration for trade. the second, “ closer to home ” for a central banker, concerns inflation and output divergences across euro area countries and their implications for policy. the third pertains to the role of the euro in fostering reforms in product, labour and financial markets. the implications of the integration of goods, services and financial markets for trade the first topic – the effects of market integration on trade – is particularly interesting, as it raises a number of issues which sometimes seem to lead to puzzling results. first, the conclusions about what we should expect as the trade effects of deeper integration are, in part, ambiguous – think, for example, of the effects of specialisation. increased competition achieved by deregulation and the completion of the single market, as well as cross - border price transparency due to the single currency, may foster higher sectoral or industry - specific specialisation. greater sectoral specialisation, as well as increased financial integration, should lead to increases in trade flows within the euro area. at the same time, however, if increased integration were to lead to more similar economic structures and business cycles, this could weaken trade flows within the euro area. but even if the expected effects of integration are not as ambiguous, appearing instead to be rather straightforward, the evidence available thus far seems not to fully conform with the expectations. take, for example, the significant progress that has been made in the 1990s regarding product market reforms, which had positive effects on the integration and the degree of competition in goods and services markets in the euro area. one could expect that easing regulations and fostering competition would lead to higher labour productivity growth in the industries concerned, as has happened, for example, in the telecommunications sector. yet, over the past decade the euro area as a whole has experienced a decline in trend labour productivity growth. a number of other effects of integration on trade should also be looked at : for instance, whether labour regulations and taxation that