central bankers'speeches let me conclude. one should not underestimate how much has been achieved in such a short period of time. nevertheless, the foundations of the european architecture are still not sufficiently robust to withstand the impact of a future crisis. this should be the focus of policymakers and relevant institutions. decisive political will to move forward with the completion of the banking union is therefore required, accompanied by a proper evaluation of the underlying implications for banks ’ business models. if the necessary political will is insufficient, then, ladies and gentlemen, allow me to say this openly : instead of putting ‘ band - aids ’ in the framework to compensate for the lack of crucial instruments, let ’ s collectively recognize that it is urgent, and in the best interest of european citizens, that we revisit the existing rules now. if it turns out that it is not possible to complete the banking union, we must structurally revisit the project. otherwise, we risk both fragmenting the single market and realising we missed this opportunity when the next crisis hits. in that case, we cannot expect european citizens ’ forgiveness. thank you for your attention. 1 as prepared for delivery. 2 communication from the commission to the european parliament and the council – a roadmap towards a banking union, com / 2012 / 0510 final. 3 nouy, d. ( 2017 ), “ banking union, three years on – has it lived up to its promises? ”, statement at the single resolution board conference, brussels : “ banks are supervised and resolved at european level, but in the event of a failure, the negative consequences are felt mainly at national level. ( … ) if, for instance, the spanish banco popular had actually failed, portugal ’ s deposit insurance scheme would have had to refund depositors in the portuguese subsidiary. that is a consequence of having supervision and resolution at european level. the portuguese authorities would not have been involved in either process. ” 4 eba, esma ( 2018 ), “ statement of the eba and esma on the treatment of retail holdings of debt financial instruments subject to the bank recovery and resolution directive ”, eba / op / 2018 / 03, available at : www. eba. europa. eu / documents / 10180 / 2137845 / eba + esma + statement + on + retail + holdings + of + bailinable + debt + % 28eba - op - 2018 – 03 % 29. pdf 5 restoy,

. 4 finally, most countries that had large budget deficits have now positive primary surpluses. in sum, the euro area is now in a better state to withstand future economic or financial shocks. despite robust growth dynamics, inflation developments have been subdued. euro area headline inflation stood at 1. 5 % in september 2017, according to eurostat ’ s flash estimate and is expected to temporarily decline towards the turn of the year owing to energy - related base - effects. measures of underlying inflation have not yet showed convincing signs of a sustained upward trend ( see chart 3 ). 4 / 7 bis central bankers'speeches sources : eurostat and ecb calculations5. looking further ahead and according to the latest ecb staff projections, inflation is expected to rise to 1. 5 % in 2017, 1. 2 % in 2018 and 1. 5 % in 2019. there are uncertainties clouding the medium - term outlook for price stability, most notably the recent exchange rate volatility, which requires monitoring with regard to possible implications for inflation dynamics. the inflation outlook from the recent imf weo depicts inflation at 1. 5 % in 2017 and 1. 4 % in 2018, which is broadly in line with ecb projections. the apparent disconnect between strong economic activity, on the one hand, and low inflation and wages on the other, is one of the stand - out characteristics of the ongoing recovery. 6 from a policymaker ’ s perspective, a predictable relationship between slack and inflation represents a key monetary policy transmission mechanism through which central banks exert their effect on inflation dynamics. while there is no agreed upon approach to estimating a phillips curve linking inflation to slack, on the whole empirical estimates indicate that the slope is currently flatter than in the period preceding the crisis, with several explanations as to why this might be the case. one reason relates to the choice of slack measurement, as the crisis may have led to structural changes in the labour market. for example, when a broader measurement of unemployment is used ( unemployment 6, currently just below 18 % ) as opposed to the narrower definition ( unemployment 3, standing at 9. 1 % ), the slope of the euro area phillips curve appears to have become steeper in recent years. other reasons proposed include : external factors including globalisation, the enhanced role of adaptive expectations in influencing wage and price decisions, anchored by central bank targets, and finally, non - linearities and time - varying behaviour of 5 / 7 bis central bankers '