at favourable terms remains unimpaired. the different elements of this comprehensive package will together support favourable financing conditions for businesses and households, which will sustain investment and consumption. greater business and household expenditure will, in turn, support inflation dynamics and make sure that they durably converge to the ecb ’ s aim. priorities for the ecb and economic and monetary union the conventional and unconventional measures the ecb has taken over the past decade have been successful in addressing deflationary risks, restoring the functioning of the monetary policy transmission mechanism and providing vital support to the euro area economy. but the ecb does not operate in a vacuum and other economic policies matter too. a better policy mix, including fiscal policy, structural reforms and prudential measures, can help achieve this objective faster and with fewer side effects. in other words, we need a coherent economic strategy in the euro area that complements and enhances the effectiveness of monetary policy. this is why there was unanimity in the governing council that fiscal policy must make a more decisive contribution. in view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space that are facing a slowdown should act in an effective and timely manner. as long as fiscal sustainability is ensured, countercyclical fiscal policy could be very effective in the current environment, given that fiscal multipliers are higher when interest rates are low. at the same time, governments in countries with high public debt should pursue prudent policies and deliver on structural balance targets. in addition to better national policies, work on completing the architecture of economic and monetary union needs to continue. in the short term, projects that are already under way must be completed, such as making the backstop to the single resolution fund operational, finishing the reform of the european stability mechanism and passing legislation for the budgetary instrument for competitiveness and convergence before the next multiannual financial framework. beyond these steps, advancing the banking union and capital markets union has become even more urgent in view of brexit, as europe needs to avoid capital market fragmentation. progress requires the removal of the remaining barriers to the free flow of capital and liquidity across borders and banking groups. a more integrated single market for financial services can make a decisive contribution to private risk - sharing and the absorption of shocks through crossborder holdings of investments. in the long run, work on a european deposit insurance mechanism needs to continue, combined with action on a host of legislative files,

by holding a geographically diversified portfolio itself. ultimately, integrated financial markets help to cushion national shocks because companies and consumers can also fall back on foreign capital markets and banks in times of crisis. such risk - sharing with the private sector works very well in the united states. according to scientific estimates, around two - thirds of an economic shock are smoothed by capital and credit markets. 3 the european financial markets are much less effective at absorbing such shocks and their ability to do so deteriorated even further during the course of the crisis. 4 sørensen, b. e. and yosha, o., ” channels of interstate risk sharing : united states 1963 – 1990 ”, quarterly journal of economics, 111 ( 4 ), 1996. van beers, n., bijlsma, m. and zwart, g., “ cross - country insurance mechanisms in currency unions : an empirical assessment ”, bruegel working papers, 2014 / 04, 2014 ; international monetary fund, “ towards a fiscal union for the euro area : technical background notes ”, september 2013, available at http : / / www. imf. org / external / pubs / ft / sdn / 2013 / sdn1309tn. pdf. bis central bankers ’ speeches the design of a capital markets union – regulatory harmonisation and institutional efficiency the commission will soon present a first proposal on what a capital markets union could look like in practice. this proposal will then be submitted for public consultation. the details are not yet known, but i would like to share with you some of my ideas about an effective capital markets union. for me, the term “ capital markets union ” means more than simply tinkering with existing regulation. it means addressing areas that are politically sensitive as well, such as disclosure requirements for companies, supervision of the financial infrastructure, insolvency law and eu - wide harmonisation of capital gains tax regulation. we have already achieved a great deal in the field of payment systems, having broken down barriers and significantly reduced costs for citizens since we introduced the single euro payments area ( sepa ), although the existing legislation now needs to be implemented with full force. we want to do the same in the medium term for the cross - border use of credit cards : in a monetary union, there should be no “ roaming ” fees when it comes to making payments. the basic principle of the free movement of capital goes back to the treaty of rome 5 and has enjoyed the same status as