where it is often thought – and reported – that joining the euro would put national fiscal policies under the control of bureaucrats in brussels or frankfurt. political integration in the euro area is an evolutionary process. the special meeting of the eurogroup, in the composition of heads of state and government, in paris on 12 october last year was a first : it addressed the financial crisis, and in doing so the euro area showed its effectiveness and its capacity for leadership. it is an important precedent, which shows that when needed the euro area can take important decisions and cooperate swiftly. the eurogroup probably won't need to meet regularly in this format – as this would risk overshadowing the finance ministers ’ meetings – but now at least it is an option, a feasible one. let me give you another example of ongoing political integration. the current crisis has shown the need to strengthen prudential supervision and, in particular, its links with central banking. this is a recommendation contained in various documents and reports, in particular that of the financial stability forum ’ s to the g7 ministers and central bank governors. several countries will be moving in this direction. in the us the federal reserve will receive greater responsibilities for macro - prudential supervision. the euro area has a centralised decision - making process for monetary policy but a de - centralised system of supervision. the conclusion is obvious : cooperation between supervisors needs to be much stronger within the euro area. this also implies that the ecb, which conducts the monetary policy for the euro area, should be entrusted with greater supervisory powers, in particular concerning macro - prudential supervision. there should be a broad consensus on such a proposal among euro area members. however, this can be implemented only by activating article 105. 6 of the eu treaty, which requires unanimity of the eu member states. will some noneuro area members oppose this? a final word on political union. a superficial reading of david marsh ’ s book might give the impression that political integration has taken place over the years as a result of some countries dominating others, distrust between political classes of different countries, threats, truces and fights, etc. it ’ s interesting to relate history in this way. but we should never forget that the creation of the euro has been the result of an unprecedented democratic and peaceful process in europe, led over 50 years by leaders who have put the interests of the people of europe ahead of any other objective. the next ten years where does this leave

a new framework for overseeing economic policies more broadly – such as competitiveness, current account balances and levels of private borrowing – to prevent problems emerging in the private sector. let me lay out for you why strengthening the pact is so important. the period between 1999 and 2008 was generally acknowledged as a period of economic fair weather. yet in this period, hardly any euro area country put their fiscal house in order, attaining what might be called a safe budgetary position. what is more, governments decided to weaken the pact in 2004 and 2005. this initiative was led by the euro area ’ s largest economies. the ecb voiced its “ grave concerns ” at the time. i economic governance in the eu, standard eurobarometer survey 74 ( published 12 january 2011 ). bis central bankers ’ speeches now see that many acknowledge that the weakening of the pact was a serious misjudgement. but the crisis has given us an opportunity. it has made plain the flaws in the pact that allowed countries ’ fiscal policies to become a problem, not just for themselves, but for everyone else within the monetary union. we now have an obligation to fix the flaws. first and foremost, this means creating stronger and more binding rules for fiscal policy, backed up by reinforced sanctions or mechanisms to ensure compliance with the rules. second, a new framework is needed to monitor competitiveness and to ensure that measures are taken to control them. we need to put in place binding rules that guide policies towards sustainable and balanced growth. such a reform package is currently before the european parliament. the ecb very much counts on the parliament to call for very clear and strong governance rules, including automaticity in triggering procedures and sanctions, which will be to the long - term benefit of europe ’ s citizens. in a union with a single monetary policy and 17 different fiscal and economic policies, a “ quantum leap ” in economic governance is necessary to ensure that the degree of economic union is fully commensurate to the already achieved monetary union. b. need to enhance growth potential the second change that is required to the economic pillar of emu relates to europe ’ s potential for growth. europe has fared reasonably well in the past decade. adjusted for differences in population growth, per capita gdp growth in the euro area has been almost the same as in the united states, at about 1 % per year. the euro area has also made significant progress on employment, which has grown by over 14 million, compared with a rise of 7.