. and we stand ready to act again when needed. however, it is important to acknowledge that there are limits to what monetary policy can achieve. this is not a question of the scope of our mandate. it is fundamentally about what different institutions are empowered to do. one pertinent example is the current shortage of credit for many households and small - and medium - sized enterprises. credit provision requires funding, capital and a positive risk assessment. the central bank can help ensure funding and address macroeconomic risk. but it cannot provide capital, nor can it affect banks ’ assessment of the creditworthiness of individual borrowers. similarly, monetary policy cannot create real economic growth. if growth is stalling because the economy is not producing enough or because firms have lost competitiveness, this is beyond the power of the central bank to fix. yet, the euro area needs sustainable growth. there are currently more than 19 million people unemployed in the euro area. almost a quarter of young people are out of work. such high levels of joblessness are a tragedy. moreover, a weak economy means fewer taxpayers and lower revenues. this puts pressure on public finances, and ultimately on our social models. so what is the best way to achieve the growth europe needs? let me turn to this issue now and share with you some reflections on this subject. bis central bankers ’ speeches growth and adjustment in the euro area some euro area countries have in the past relied on debt to support growth and fund social spending. but this path has led them to a difficult situation today. they have ended up with high public debts while growth has steadily fallen. in this country, for instance, public debt has risen from around 20 % of gdp in 1980 to over 90 % of gdp today. in that time, annual gdp growth averaged 2. 3 % in the 1980s, 1. 9 % in the 1990s, and 1. 8 % in the 2000s up to the crisis. this suggests that, for all euro area countries, a new approach is needed. an approach that can deliver growth and jobs, and sustain social models, without creating an unsustainable debt burden for future generations. in my view, this requires two complementary responses. the first response is to ensure that fiscal consolidation, which is necessary to contain debt levels, is made as growth - friendly as possible. for instance, relying less on tax increases would help sustain citizens ’ disposable income. prioritising capital investment over current spending would do more to lay the

that financial conditions in both core and periphery countries return to normal ; and that our monetary union becomes truly single again. it has two indispensable elements : a strong single supervisory mechanism ( ssm ) and a strong single resolution mechanism ( srm ). a strong system of common supervision is key to increase confidence in the health of euro area banks, which has been damaged due to supervisory failures in the past. progress is already well underway here, and the single supervisory mechanism will take over supervision one year after the legislation is adopted. but to ensure that common supervision is credible, it needs to be accompanied by a mechanism that can wind down failing banks without causing financial instability. this is why we need a single resolution mechanism. and it needs to have a strong european dimension to be able to deal effectively with large, cross - border banks. but banking union is not the only example of where closer union is needed. ultimately, the euro area needs to be drawing closer in all fields of economic policy. the recent call from the leaders of france and germany for closer economic union shows that this message is being understood. but it is important that form is fully aligned with substance. in my view, a true economic union means three things. first, it means every country ensuring its national economy functions properly, without external imbalances and high unemployment. we cannot have a strong economic union without strong national economies. second, it means transferring some sovereignty over decision - making to the european level – accepting decisions that are made for the good of the euro area as a whole, even if, at that moment in time, individual countries may disagree with them. third, it means applying the same rules to all members of monetary union. this is not only a condition of fairness between countries, but also a pre - condition for deeper integration. only if there is trust that each member will play by the rules can a union of mutual solidarity become possible. for these reasons, moving towards closer economic union also requires an equivalent deepening of political union. greater authority at the european level must be matched by greater democratic legitimacy. and here both the european parliament and national parliaments have a key role to play. as herman van rompuy has reminded us, national parliaments have become eu institutions. conclusion let me now conclude. the euro area has made much progress in recent years, but it still faces many challenges. solving them requires eu institutions and national governments to work in concert. the ecb has done as much as it