##tification of the macroeconomic impact of integration of eu financial markets ”, report to the european commission. see the report on financial integration in europe at http : / / www. ecb. europa. eu / pub / pdf / other / financialintegrationineurope200804en. pdf. equity markets. a key obstacle to greater bond and equity market integration is the lack of a sufficiently integrated infrastructure for securities clearing and settlement in the eu. substantial progress has also been made on the integration of banking markets, namely in the wholesale and capital market - related segments. cross - border interbank loans have increased to almost a quarter of total interbank loans and euro area banks ’ holdings of securities issued by banks in other euro area countries have almost tripled over the past decade. by contrast, retail banking markets have remained fragmented so far. for instance, the cross - border share of loans to non - banks has more or less stagnated at a very low level, below 5 %. similarly, the cross - country dispersion of banks ’ interest rates on loans to nonfinancial corporations and households has remained relatively high, especially with regard to consumer loans. public sector action to foster financial integration further efforts are needed to complete the single financial market, particularly in those areas where integration is currently lagging behind, namely in the corporate bond, equity and retail banking markets. while i would like to highlight again the primary role of market - led action in this respect, public authorities should nevertheless strive to facilitate progress. i see three main priorities at the current juncture, namely to : ( i ) further enhance the eu institutional setting for financial regulation and supervision ; ( ii ) remove obstacles to cross - border securities clearing and settlement ; and ( iii ) enhance the eu regulatory framework and market infrastructure for retail banking. the european financial integration process presents a twin challenge for the eu regulatory and supervisory architecture. first, closer convergence of prudential rules and supervisory practices is needed in order to facilitate the efficient operation of cross - border financial institutions and to safeguard an effective pan - european level playing field. second, while financial integration increases the overall shock - absorbing capacity of the financial system it also increases the likelihood that financial risks may be cross - border in origin or nature. against this background closer cross - border cooperation in monitoring and addressing financial risks is of the essence. the eu has already taken important steps to foster regulatory and supervisory convergence and cooperation in recent years. the introduction of an enhanced

##ary plans currently being prepared for 2004, there be a correction of excessive deficits within the agreed time - frame in the countries concerned. in the other countries with fiscal imbalances, a structural consolidation effort of at least 0. 5 % of gdp per year is required. all fiscal plans need to be part of a comprehensive and credible medium - term strategy, with an emphasis on expenditure restraint and a growth - oriented restructuring of expenditure. another area in which we have seen insufficient progress over recent years is that of structural reforms. while some initiatives are under way, more needs to be done to address structural rigidities in the labour and product markets. i should like to emphasise that the benefits of these reforms for the economic growth potential of the euro area would be substantial. such reforms are essential to address what is perceived as the euro area's main economic problem, namely the high level of structural unemployment. while these benefits will be fully reaped over the medium term, i am also convinced that reforms would also support economic growth in the short term, as they would strengthen confidence and make the euro area more attractive to investors. 2. issues relating to euro banknotes let me now turn to issues relating to euro banknotes. continuing a practice that was established last year, the ecb published, in july, its biannual information on the counterfeiting of the euro. the data confirmed what was expected from the outset, namely that the counterfeiting figures would increase in the early years of the new currency. in addition, because of its status as an international currency, the euro may be considered a more attractive target than any of the legacy currencies were. however, despite these factors, and although it may be too early to identify any reliable trends, euro counterfeiting has currently settled at a level far lower than the aggregate level of counterfeiting of the legacy currencies in 2001. this factor should be clearly emphasised, since much of the public reporting in this regard has been exaggerated or distorted. the euro banknotes are designed to be among the best in the world when it comes to counterfeit resistance. moreover, in line with the normal practice of central banks, preparatory work has begun on developing even better protected banknotes. these may be issued towards the end of this decade. however, even the most sophisticated security devices will be useless if the banknote user makes no effort to check them. therefore, our message to the public in our press releases on counter