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

fiscal side. the prudent fiscal policy that has been implemented since 2002 has made significant contributions to the disinflation process and the economic growth. the ambitious primary surplus targets are at the center of the improvement in fiscal policy. however, i should also underline the progress in institutional and legal framework, such as the introduction of the public fiscal management and control law, the public procurement law and the multi - year budgeting framework. three year inflation targets that are compatible with the three - year budgeting practice are also one of the good examples of coordination between fiscal and monetary policies. another pillar of better economic governance is financial stability. a stable and healthy financial system is the key to sustainable growth through allocating savings to the real sector in a country. law defines financial stability as the auxiliary objective of the central bank of turkey. establishment of the banking regulation and supervision agency, successful implementation of the banking sector restructuring program and the new banking law that brought the legal framework with best international practices were the milestones of legal and institutional reform in the financial sector. no need to say that the improved macroeconomic framework through successful monetary and fiscal policy implementations also contributed much to financial stability. last but not least, i should say that there is also an effective cooperation among the central bank of turkey, the banking regulation and supervision agency, the undersecretariat of treasury, the capital markets board and other public authorities and also with private sector representatives. the fourth and the final set of actions that has been undertaken towards better economic governance is structural reforms. turkey has achieved significant progress in this front, but today, i would like to put a special emphasis on the role of regulatory and supervisory institutions without getting into details. establishment and effective implementations of institutions such as the banking regulation and supervision agency, the turkish competition authority, the energy market regulatory authority, the telecommunications authority and many others have contributed to the development of a competitive, resilient and efficient economy in turkey. it is not surprising that manufacturing, retail, energy and financial sectors have attracted the interest from foreign investors in recent years, as witnessed by over 40 billion usd foreign direct investment in the last two years. the good corporate governance practices have also contributed to the overall economic governance in the country. as a result of the steps taken in the four categories that i have just mentioned, turkey has shown an impressive economic performance after 2001. the consumer price inflation declined to the single - digit territory. the gdp has continuously grown in the last 24 quarters.