the balance sheet of the banking sector itself. only the latter shows the interaction with the real economy. and this is captured by monetary data and bis central bankers ’ speeches credit data which, as i have mentioned, are still very subdued. you can rest assured that the governing council will use all the instruments at its disposal to counter possible upside risks to price stability should they materialise. we also hear concerns that the eurosystem is exposing itself to excessive risks. i would like to underscore that the expansion of our balance sheet is being managed with extreme prudence. we continually review collateral eligibility and our risk control framework. furthermore, the application of conservative risk control measures, such as haircuts, in all monetary policy operations protects the soundness of the eurosystem ’ s financial position. let me conclude this point by recalling that all non - standard measures are temporary in nature. moreover, liquidity support cannot substitute for capital or for sound fiscal and structural policies that bring about sustainable growth and stability in the european economy. dealing with macroeconomic imbalances in a currency union now, i would like to discuss the second topic selected for our exchange of views, namely macroeconomic imbalances in the euro area. of course, divergences of economic developments are a normal feature within a monetary union. such divergences can also be observed on the other side of the atlantic. but they should not become of a persistent and structural nature. unfortunately, very large imbalances were allowed to accumulate over recent years in several european countries. these imbalances stemmed from different sources : insufficient fiscal discipline, financial excesses, failure to implement structural reforms especially, but not exclusively, in the labour and product markets and significant competitiveness losses. all of this necessitates urgent and resolute adjustment. clearly, it cannot be the responsibility of the ecb to address these imbalances. from the perspective of monetary policy, our primary objective is to maintain price stability in the euro area as a whole. for that purpose, the ecb continuously monitors all relevant information from the countries and various business sectors of the euro area. but the monetary policy stance of the ecb has to be focused on the entire euro area. it cannot address divergences among individual euro area countries. that is the task of governments : they must undertake determined policy actions to address major weaknesses in the fiscal, financial and structural domains. we note that progress is being made in many countries. these measures need

yves mersch : opening remarks at the academy of european law opening remarks by mr yves mersch, member of the executive board of the european central bank, at the academy of european law, luxembourg, 29 june 2016. * * * ladies and gentlemen, for over 20 years the academy of european law ( era ) has provided a forum for law practitioners to debate european legal issues. and the need for such a forum remains strong today – maybe stronger than ever. shakespeare ’ s character tranio in taming of the shrew exhorts us to “ do as adversaries do in law – strive mightily, but eat and drink as friends ”. this is an appropriate sentiment for tonight ’ s event : the era is providing food and drink and has invited me to give you all something to argue about. this is a critical juncture for the european union ( eu ). a number of states have re - imposed border controls to stop the inflow of refugees, anti - eu parties are gaining popularity in many member states and one of the largest members has just voted in a referendum to leave the union. these factors provide a challenge to our institutions and legal frameworks at eu and at national level – a challenge that also legal professionals across europe need to engage with. i believe there are many reasons why the vision of a united europe is worth fighting for. let me mention just four : 1. to preserve peace ; 2. to improve economic prospects ; 3. to defend our values ; and 4. to increase personal options continent - wide. the founding fathers of the eu were willing to make political sacrifices to end bloodshed in europe, following two devastating wars just decades apart. let us not forget that we are here in a former prison in which every respected luxembourg family had relatives who stood up for these values. after 70 years of peace in western europe it is easy to be complacent that war will not happen again. yet the current situation in syria, iraq, ukraine and that of the balkans in the 1990s shows that peace is vulnerable, even on our doorstep. but defence and security have to be understood as a common endeavour. the economic benefits of the union are well documented : free trade, the removal of non - tariff barriers, the elimination of transactions costs of foreign exchange payments and the introduction of a single yield curve across the euro area to name but a few. these measures have reduced costs for businesses and households, and in turn generated higher income and created jobs. looking ahead