monetary union is therefore essential. this does not require a choice between extreme options. some observers have argued that long - term stability requires a return to the original maastricht framework. others have suggested that we need a full federation, a united states of europe. in my view, neither approach is necessary. we can ensure future stability by elevating to the european level only those policies that are essential for our union to function effectively. i have been asked to work on identifying these policies under the lead of the president of the european council and together with the presidents of the commission and the eurogroup. in our view, a stable and prosperous union must be built on four pillars. the first pillar is a financial union that can maintain a stable and integrated financial market. this implies a single supervisor to control risk - taking by banks and reduce regulatory capture – and a single resolution system to ensure that banks can fail without dragging down their sovereigns. as regards the commission proposal for a single supervisor that i mentioned earlier, i am confident that governments will find agreement on the appropriate perimeter of supervisory responsibilities, as well as issues related to democratic accountability. for our part, we will guarantee the firm separation of monetary policy from supervisory tasks. we will also ensure close cooperation with national supervisors who have the competence and resources to implement supervision. the second pillar is a fiscal union that can effectively prevent and correct unsustainable budgets. the consequences of misguided fiscal policies in a monetary union are too severe to remain self - policed. so a stable emu would ultimately require the establishment of true budgetary oversight at the european level. bis central bankers ’ speeches the third pillar is an economic union that can guarantee the highest standards for competitiveness. countries must be able to generate growth and high employment without excessive imbalances. this implies that there must be minimum standards for key economic policies and incentives for continued structural reform. the fourth pillar is a political union that can engage euro area citizens more deeply and make the other pillars legitimate. this is essential to ensure that where sovereignty in selected policy fields is pooled, democratic participation is deepened in parallel. a firm commitment from governments to complete economic and monetary union is the best complement to the ecb ’ s actions. it ensures that, by supporting immediate confidence, we will build the bridge to a more stable and prosperous euro area. and it sends a clear signal to investors that the euro area has a vision for a sustainable future. conclusion let me draw to a close

we have seen highly divergent borrowing costs for the real economy in different parts of the euro area. in our analysis, these differences were larger than justified by individual credit risk. they reflected, to a considerable extent, unfounded fears about the future of the euro area. for example, a loan to a family in germany for a house purchase with a five - to - ten - year maturity had an interest rate of 3 % ; the rate for a comparable borrower in spain was 7. 5 %. at the same time, the average firm in germany paid around 3 % for a new loan over five years, while the average firm in italy paid above 5. 5 %. in these circumstances, monetary policy cannot work properly. this is because a key channel through which the ecb ensures price stability is through the cost of credit, in particular bank credit. bank credit accounts for about 70 % of external financing of euro area firms, and that ratio is even higher for smaller enterprises. but if we are unable to influence borrowing costs in some parts of the euro area, this channel is disrupted. firms and households have less access to financing, economic growth stalls and these regions are faced with a risk of deflation. in other words, our ability to ensure price stability for the whole euro area is compromised. the ecb ’ s governing council therefore faced a choice : to accept this situation and allow the singleness of its monetary policy to be undermined ; or to take actions within its mandate to restore the normal transmission of monetary policy across all parts of the euro area. we decided in favour of the latter. our actions aim to repair monetary policy transmission through providing a credible backstop in government bond markets that removes unfounded fears and tail risks from the euro area. insofar as this supports investor confidence, it will help stabilise conditions in other markets, bis central bankers ’ speeches such as those for corporate and bank bonds. this ultimately feeds into more even borrowing costs for the real economy across the euro area. early signs suggest a positive effect. since the beginning of this month, euro area banks issued about 27 billion euros of new debt – the most since march of this year. some of these banks had not been able to access the market for almost six months previously. non - financial corporations have also issued around 43 billion euros of new bonds, the highest figure for five of the last six months. it is too early to tell the full impact of our measures on borrowing conditions for firms and