role both in monetary policy transmission and in ensuring the necessary financial stability. two main issues in particular should be borne in mind, not just by the authorities, but also by the banks themselves : with some banks performing well and some less so, restructuring and consolidation of the sector should continue, restoring a better functioning banking system for europe. at the same time, competition must be enhanced. in particular, i am thinking about banks ’ cross - border activities. we would benefit in many ways from having area - wide banking groups, reflecting the spirit of the banking union. banks should compete across borders in the full range of their activities, not just in “ easier ”, more standardized products such as housing loans. 3 / 3 bis central bankers'speeches

these developments, and do they have implications for the level of the long - term real natural rate of interest, or the equilibrium interest rate, r *? to answer these questions, it is useful to look at whether production is being reshored or transferred back home at substantial levels. in other words, is globalization indeed reversing? slide 8. geopolitics is shaping the operating environment – along with other secular trends yes, we are witnessing signs of trade fragmentation. given the steep rise in trade barriers and protectionism, the ramifications to the world economy, not least the emdes, should not be underestimated. but so far, no fully - fledged reversal of economic globalization has taken place. what we are mostly seeing is the lengthening of global value chains. even if direct trade between china and the west is in modest decline, chinese value - added imported by the u. s. and eu have not diminished – our bofit staff analysis indicates that, in between 2018 and 2023, chinese value added remained stable in us manufacturing imports and slightly increased in europe – as shown in the left - hand graph. it seems that value chains have simply been rerouted via connector countries, such as mexico and vietnam. smaller countries like finland and the other nordics have greatly benefited from deepening economic integration. multilateral trading system has been a win - win and a key building block of the strategic community of liberal democracies. economic cooperation with the united states remains crucial for this achievement and alliance, even if this fact has not been overly prevalent in the u. s. presidential elections. trade wars would only damage this bond. suffice it to say that we europeans are forced to pre - emptively prepare for different options. thanks to finland's accession to nato, our ties with the us and our trade partnership has strengthened, also in strategic areas ( right - hand graph ). notable cases are cruise ships and tech products exported to the us, and on the imports side, the new american f - 35 fighter jets that will replace soon our cherished but aging f - 18 hornets. 4 / 7 bis - central bankers'speeches the biggest increase in finland's trade with the us has come from trade in digital products and it services. in my view, this underlines the substantial mutual benefits of this economic partnership. slide 9. estimates of the natural rate of interest in the euro area the precise implications of geoeconomic fragmentation for inflation, growth