the same time, the recession has been deep and has left unprecedented and unacceptably high unemployment. until economic growth is able to significantly reduce unemployment, the authorities should not become complacent in their efforts to continue the structural and institutional reforms essential to overcome the crisis. it is clear that for the successful completion of the rebalancing process europe needs more investment and higher domestic demand growth. we therefore need a more coordinated approach to macroeconomic policy at the euro area level to achieve higher demand growth, bis central bankers ’ speeches as well as the continuation of structural reforms in all member countries in order to increase growth and facilitate a more encompassing rebalancing process. at the same time, to support national structural reforms in stressed countries, the enactment of the announced contractual programmes with financial means to support their implementation should play a significant role. finally, it would be important if a future decision could be reached to implement at the euro area level what is referred in the president van rompuy ’ s report “ towards a genuine economic and monetary union ” as “ …. the establishment of a fiscal capacity to facilitate adjustment to economic shocks. this could take the form of an insurance - type mechanism between euro area countries to buffer large country - specific economic shocks. such a function would ensure a form of fiscal solidarity exercised over economic cycles, improving the resilience of the euro area as a whole and reducing the financial and output costs associated with macroeconomic adjustments ”. in the view of the president van rompuy ’ s report, a stable emu needs to be built on four pillars : financial union, fiscal union, economic union and political union. member states have been able to decide a remarkable sequence of reforms in the past few years and there is now a much clearer vision of what rules and institutions are essential for monetary union to function more effectively. the single currency needs strong common institutions. strong institutions to supervise and stabilise the financial market ; to guide fiscal policies ; to coordinate economic policy, guarantee competitiveness and encourage sustainable growth. this is the vision that should guide us in all our endeavours to definitely overcome the european crisis. thank you for your attention. bis central bankers ’ speeches

the economic downturn and the need to backstop banks, that sovereign debt began its steep rise and became a driver of the crisis in itself. drawing the right lessons for the euro area in emphasising this private debt - focused narrative for this crisis, my aim is not to negate the importance of fiscal policies. fiscal policies certainly should not have been pro - cyclical, and fiscal discipline today is essential to ensure sustainable debt levels in the future. my aim is rather to ensure that we recognise the central role played by the financial sector in the crisis and so draw the right lessons for the future. the most important such lesson is that the euro area needs stronger governance of financial policies – an ability to identify and curb cross - border financial flows and hence prevent debtdriven imbalances. the decentralised system of supervision we had before the crisis, based on loose cooperation between national supervisors, simply did not permit this. it is therefore misleading to say that the crisis was solely the result of periphery countries living beyond their means as a matter of policy. the authorities had to respect the single market rules and could not contain alone the large capital inflows that were fueling the imbalances. indeed, with a national approach to supervision, the forces driving financial developments lay largely outside the legal capabilities of national supervisors. in saying this, i do not deny that supervisors were also too slow to react, due in part to a belief in self - regulating markets. yet had they tried to contain these financial inflows, it is questionable whether they could have done so successfully. the conclusion i draw is as follows : to have an integrated financial market and overall stability there cannot be purely national supervision. instead, there has to be supervision at level of the market – that is, at the european level. let me therefore turn to the single supervisory mechanism. bis central bankers ’ speeches the benefits of the single supervisory mechanism the ssm, which will formally take over supervision in november next year, is being designed to solve the “ financial trilemma ” 1 created by national supervision – that is, to support financial integration and maintain financial stability by moving supervision to the european level. it will address both the institutional and macro - prudential limitations that supervisors faced before the crisis. starting with the institutional limitations, the key innovation of the ssm is that it creates genuinely european supervision, by which i mean supervision on both core and peripheral banks. from november next year, every bank in europe will be part