it with capital markets - based funding. and in europe above all places there is ample room to do so. the european stock market is only 60 % the size of the us stock market when measured in relation to gdp. adrian, t ; shin, h s ( 2010 ), liquidity and leverage. in : journal of financial intermediation, vol 19 ( 3 ), pp 418 – 437. leroy, a ( 2014 ), credit procyclicality and financial structure in the eu ”. available at ssrn : http : / / ssrn. com / abstract = 2568112 or http : / / dx. doi. org / 10. 2139 / ssrn. 2568112. bis central bankers ’ speeches likewise, the european market for venture capital is 20 % the size of the us market, and for securitisation the percentage is even lower. 2 in the end, it comes down to the uncontested argument of diversification. increasing the share of capital markets will improve and broaden access to funding particularly for small and medium - sized enterprises. at the same time, it will improve the matching of investors to financial risk, thereby increasing the efficiency of the financial system. as a result, the financial system will be able to better support sustainable economic growth. 3. integration – forming a single capital market the second objective of the european capital markets union is to improve the integration of capital markets in the entire european union. what is it that integrated capital markets can deliver? one of the main arguments is that they can improve private risk sharing. the technical question is : to what degree does a shock to the economy affect consumption? empirical studies for the united states show that integrated capital markets cushion around 40 % of the cyclical fluctuations among the us federal states. a share of around 25 % is smoothed via the credit markets, while fiscal policy cushions 10 – 20 % of shocks. altogether, around 80 % of a given economic shock is absorbed before it can affect consumption 3 studies for canada yield similar results. 4 in europe, the picture looks different. here, it is mainly credit markets that cushion economic shocks – and they are not very effective in doing so. altogether, only around 40 % of a given shock is absorbed before it can affect consumption. 5 increasing the share of capital markets and integrating them across borders would therefore help improve risk sharing in europe and reduce the volatility of consumption. 4. how to get there

that labour market reforms need time to take their full effect. the measures introduced in particular in spain, italy and greece will not lead to full employment overnight, especially as the devil is often in the detail. it is therefore not certain whether the changes adopted so far are enough to increase the flexibility and performance of the labour markets there sufficiently. however, the reforms must lead in the medium term to “ light at the end of the tunnel ” on the labour market. pessimists who deny the possibility of a turnaround in the crisis countries are currently having a field - day. however, if we remember the state of the german labour market as recently as the middle of the last decade, few would have dared to hope for the development emerging in subsequent years. the external environment was naturally favourable at that time and the starting point was not as serious as that currently faced by other countries. i believe that the crucial lesson is that with appropriate measures the functioning of the labour market can be changed so that this per se, in a very broad economic framework, allows more opportunities and thus also a more favourable employment trend. 3. germany ’ s contribution to reducing imbalances the aim must be for europe as a whole to emerge stronger from the crisis. but in the discussion on macroeconomic imbalances, there are often calls to force the core countries to actively reduce their current account surpluses – through interventions in the wage discovery process, for instance, or by way of additional fiscal stimuli – so as to bring relief for the deficit countries. i won ’ t beat around the bush here : besides the fact that narrowing the problem down to an analysis of current account balances is, in itself, unfortunate, to say the least, this michael krause and harald uhlig ( 2011 ), “ transitions in the german labor market : structure and crisis. ” deutsche bundesbank discussion paper series 1 : economic studies no 34 / 2011. bis central bankers ’ speeches path would do a disservice to europe. after all, the euro area is not an island but a region competing with the usa, japan or china. what is more, fixing one ’ s sights on a greater contribution by germany overlooks the reality of the situation. firstly, germany ’ s trade surplus with the euro area is less than 2 %, 2 and secondly, boosting demand in germany would trigger only negligible spillover effects in the periphery countries. this is also confirmed by imf research. on top