that they are difficult to redress. and it must be acknowledged that here a good deal of progress has been made over the past year. the unfolding of the crisis has shown that the governance model in place to date in the eu has been of no use in ensuring economic policy consistency or in managing crisis episodes flexibly and effectively. it ’ s now clear that public finances were not sufficiently restructured in the upturn, that macroeconomic divergences were excessive and that we need a well - designed financial aid mechanism to assist ailing countries swiftly and effectively. mindful of this, european governments and institutions have taken major steps towards correcting deficiencies in three fundamental areas : the strengthening of fiscal discipline, closer surveillance of macroeconomic maladjustments and the creation of a permanent crisis - management framework. starting with fiscal discipline, public debt levels will be more closely monitored and countries will have better incentives to comply with their commitments, through the introduction of broader and transparent sanctioning arrangements, which will moreover be applied at an earlier stage and, as far as possible, automatically. further, the reform of national fiscal frameworks is being promoted, so that budgetary policy rules and surveillance systems will be adopted that help curtail spending. moreover, a new framework for the prevention and correction of macroeconomic imbalances is being established. the aim of this mechanism is the early identification of the emergence of potentially “ excessive imbalances ”. when imbalances are considered to be too big, an excessive imbalance procedure will be initiated which will include recommendations for the adoption of corrective measures. the third key element of eu economic governance reform is the creation of a permanent crisis - management instrument, the so - called european stability mechanism, which will come into force in mid - 2013. geared to lend up to €500 billion, this mechanism will provide funds to countries with liquidity problems under strict conditionality. finally, a mention for the euro plus pact, approved in march by the euro area heads of state and of government. this pact involves a commitment at the highest political level to adopt the measures needed to attain competitiveness and employment - promoting objectives, to contribute to the sustainability of public finances and to reinforce financial stability. there ’ s always room for improvement and, at the ecb, we have called on heads of state to strengthen governance procedures further, for instance by making sanctions more automatic in cases of non - compliance so as to prevent governments succumbing to the temptation of being

integration projects came unstuck, the number of institutions needing additional capital rose to 13. on 14 april, the banco de espana approved the strategies and timetables submitted by these 13 institutions or groups. two were subsidiaries of foreign banks, which have been recapitalised by their respective parents ; the two spanish banks have reinforced their capital by resorting to the markets ; four savings bank groups have considered an initial public offering or the raising of capital from investors as a priority option, with a subsidiary alternative of resorting to the frob ( fund for the orderly restructuring of the banking sector ) if their initial approach did not work out as planned ; another savings bank has stated its preference to participate in an integration process with another more capitalised institution ; and, lastly, the remaining four savings banks have expressed their preference to reach the required level of capitalisation by means of the frob taking a stake in their capital. before 28 april, those institutions that had considered going to the frob as a priority source submitted their specific recapitalisation plans to the banco de espana. in the meantime, the frob has formally undertaken, with all institutions that have submitted strategies envisaging the possibility of resorting to it, to provide the necessary funds so that all institutions in the spanish banking system may comply with the new core capital ratio. at present, the recapitalisation plans submitted by the institutions are being analysed, as a further step in the timetable. by 30 september 2011, these institutions must have completed what was stipulated in their strategies. this deadline may, as provided for in the decree - law, be extended by three months by the banco de espana if considered necessary for justifiable operational reasons, and by up to six months if an initial public offering is involved. a conclusive step will thus have been taken in the savings banks sector restructuring strategy, which has entailed unprecedented change on many levels : balance - sheet write - downs at institutions ; integration projects among savings banks to achieve bigger and more efficient institutions ; a change in corporate model to smooth access to capital and to encourage enhanced governance, and, lastly, the recapitalisation of the sector. if these three reforms are resolutely seen through, there will be a favourable change on the markets similar to that seen in the first half of this year when the pensions reform and the recapitalisation of credit institutions were approved. spain might feature next year as a euro area country that still has a high