. the final judgment now rests on our being able to show that cohesion also produces growth and jobs. the second reason why a stronger role for the union could be beneficial is that, similar to fiscal policies, establishing rules at the level of the union may in fact help national authorities implement reform. structural reforms reach deep enough into societal arrangements and practices that they can only succeed if they are made the object of strong domestic ownership. at the same time, those reforms require substantial political capital. historical experience, for example of the imf, makes a convincing case that the discipline imposed by supranational bodies can make bis central bankers ’ speeches it easier to frame the debate on reforms at the national level. in particular, the debate can be framed not in terms of whether, but in terms of how reform needs to take place. in other words, i am not convinced by the argument that, in terms of structural reforms, there is an opposition between rules and ownership. on the contrary, they can be mutually reinforcing. conclusion in conclusion, there is a strong case for us to apply the same principles to the governance of structural reforms as we do to fiscal governance. the essential cohesion of the union depends on it. with the benefit of hindsight, it would have been useful to establish, alongside the existing convergence criteria, a set of structural criteria that had to be met to enter the euro area, and then respected once inside. but we have to start from where we are. thus, i would see merits in initiating, as a one - off, a new convergence process within the euro area – one which ensures that all countries are truly in a position to benefit from membership, and that none cause harm to another. today, national governments are not able to fully exercise their sovereignty alone, whether sovereignty is defined normatively, a la jean bodin, in terms of inalienable rights, such as to declare war and treat the conditions of the peace, to judge in last resort, to raise taxes and to mint money ; or whether it is defined positively, a la john locke, in terms of a fiduciary power to act for certain ends. individually, national governments are simply not powerful enough. to serve their purpose, they have to learn to govern together ; they have to learn to be sovereign together so as to respond to their citizens ’ needs. those needs today are growth and job creation. bis central bankers ’ speeches

conceived, as early as the late 1950s, as a response to the costs associated with exchange rate frictions within a single market, which at the beginning was only for agricultural products. already in 1944, in an influential study commissioned by the league of nations, the great economist ragnar nurkse had warned convincingly of the economic losses resulting from currency volatility. tommaso himself later argued in his “ inconsistent quartet ” that free trade, free capital movement, fixed exchange rates and independent monetary policies were ultimately incompatible. and the euro itself has had consequences. some of these were identified early, in particular with respect to fiscal governance. some were fully acknowledged only later, such as the pervasive effects of macroeconomic imbalances. but in both cases, the crisis showed that the cohesion of the union in fact relied on the behaviour of each of its members. this is why i believe that the case for community - level governance does not apply only to fiscal policy, or to the banking union, but also to structural reforms, as i will endeavour to explain. fiscal policies within a monetary union the case for fiscal governance at the community level is well understood, and stems from the negative externalities that unsound public finances in a member state can generate for its neighbours. the crisis not only validated this concern ; it reinforced it, by showing that externalities could be even more pervasive than initially thought. the fiscal soundness of a government is obviously first and foremost in the interest of its own country. countries with excessively stretched public finances can lose the ability to use fiscal policy as a counter - cyclical stabilisation tool. indeed, this ability relies on the government being able to access markets under favourable conditions at the time when it needs to, at the bis central bankers ’ speeches trough of the cycle. as we have seen during the crisis, this cannot be taken for granted when doubts arise about the sustainability of the debt. this would be problematic anywhere but it is more so in a monetary union, as the common monetary policy can only aim at price stability for the euro area as a whole. it cannot cater specifically for asymmetric shocks. in the absence of a federal budget, like we see in the united states, the soundness of government credit everywhere is of paramount importance to counteract regional slumps. if some governments retain the ability to stabilise their economies but others do not, then it becomes more plausible that economic divergence will occur.