flexible and market - oriented. fourth, significant steps have been taken to improve economic policy coordination. these measures included the strengthening of the stability and growth pact, the establishment of the european semester, stronger emphasis on macroeconomic imbalances and the fiscal compact. last but not least, crucial steps have been agreed to move towards the creation of a banking union. the single supervisory mechanism will start operating in november 2014 and agreement on the single resolution mechanism has been reached. these measures will bis central bankers ’ speeches work to reinforce the european banking system, reduce the negative feedback loops between banks and sovereigns and overcome fragmentation in eu financial markets, promoting growth. results and challenges ahead the european strategy to deal with the crisis is delivering results, as interest rate differences between core and periphery countries have been reduced, programme countries have regained market access and the banking sector has been strengthened. however, many challenges remain. a key characteristic of the euro area economic recovery is the continuing decline in loans to the private sector. the recovery is so far “ creditless ” at both the euro area as a whole and, in many cases, in individual countries. because the euro area economy is bank - based, bank lending is especially significant for companies and, in particular, for smes, which produce the bulk of goods and services and account for a large share of employment. consequently, the on - going credit contraction raises the question : can the recovery be sustained in the presence of negative loan growth? personally, i doubt it. looking ahead, there is a need to deal with limited potential growth in the euro area. to this end, euro area members are increasingly recognizing the need for joint efforts and coordinating national structural policies for growth and jobs, as reflected in the recent conclusions of the european council. today ’ s speaker klaus regling, as the first managing director of the european stability mechanism and chief executive officer of the european financial stability fund, has been at the centre of the euro area crisis. his career has spanned 35 years in senior positions mainly in the public sector. he worked at the imf in washington and jakarta ; he spent around 10 years at the german ministry of finance, working on preparations for monetary union ; he then moved to the european commission where he was director general for economic and financial affairs from 2001 to 2008. he is thus perfectly suited to address the issue of how we overcome the euro area crisis. bis central bankers ’ speeches

use different technical solutions and environments. hence, it is logical to seek to draw on the synergies between both systems. modernising target2, leveraging the possibilities which are already available in t2s and consolidating the technical and functional components of target2 and t2s services are the primary objectives. the governing council strongly supports these objectives. 1 / 3 bis central banker's speeches in addition, consolidating target2 and t2s provides an opportunity to further improve cyber resilience, to enhance the services offered to users and to establish a single access channel. during the investigation phase of the project, which will run throughout 2017, we will follow up on this year ’ s market consultation that was launched in february with the release of a consultative report on real - time gross settlement ( rtgs ) services. 2. settlement services to support instant payments for the eurosystem, the biggest challenge of digitalisation in the payments industry is to ensure that the introduction of innovative payment products and services that are developed by the market does not reintroduce fragmentation into the european market. that is why the eurosystem fosters the development and implementation of pan - european solutions. one of the most prominent of these innovative services is instant payments. by november 2017 end - user solutions for instant payments in euro should be made available at pan - european level by payment service providers. this means that by november 2017 the european financial market infrastructure has to be ready to clear and / or settle instant payments on a pan - european scale. the governing council has decided that it will launch and closely monitor an investigation with market participants on the necessity of extending settlement operating hours for a subset of its regular settlement services up to 24 / 7 / 365 to allow for real - time settlement of instant payments. instant clearing will be supported by the delivery of an enhanced target2 functionality for the automated clearing houses. the project per se does not question the efforts of the achs to offer instant clearing. this is because instant clearing and instant settlement are complementary services ( since the availability of instant settlement can make instant clearing less costly ). it is true that they are also alternative services ( since instant clearing may replace the need for instant settlement and vice versa ). furthermore, the project is the best guarantee that a pan - european solution for the processing of instant payments will be available since target2 is already a pan - european solution. if deemed feasible, it is understood that real - time settlement of instant