constancio : well, we are not predicting what the governing council will do. we are not trying to do that. this is the assessment that we have been producing also as a result of monetary policy meetings of the governing council itself, like the more recent one we had. so it ’ s going along the same lines. personally, i don ’ t see anything in the speech that would be different from, say, the previous two main interventions about monetary policy done by the president. let us talk about one area of optimism, and that ’ s the political tailwind. how confident are you about the state of the political european landscape now? is there more of a momentum for reforms now? constancio : crises are always bad for the social and political mood, and recoveries are always good. and so there is a bit of a recovery, which is becoming stronger, and that, of course, has had its effects, in the mood of societies, of public opinion, and also in the political sphere. that ’ s what i think the president indicated, and indeed, there were fears, especially from outsiders, that some of the political developments in some european countries would go in the direction of creating some doubts, which were dispelled. so that ’ s what he refers to. but throughout all this period there is one thing that is important to recall : if you go to the eurobarometer that is the result of surveys in all member states, you see throughout all these years, all these years, that the support for the euro – being in favour of the single currency, the euro – has been stable at around 70 % of europeans in the euro area countries ; and that in all countries there was a majority supporting the euro. a majority in all countries. the numbers are different according to the different countries, but in all they are the majority. so this has been the support that the project has benefited from, and the present recovery has indeed reinforced those views. but we are talking about reforms as well. we ’ re talking about the banking sector : the european banking sector is not as strong as it should be. just over the weekend we have seen two italian banks getting state aid, so it was hugely criticised. why did they get that exception, that they ’ re allowed to have state aid? constancio : it is not an exception. everything is foreseen in the laws. brrd, the directive on resolution of banks, was not applied because

to establish an overall better monitoring and assessment of the risks to the financial system. on the crisis management side, the ecb focuses on central bank operations and on crossborder arrangements between financial authorities. with regard to central bank operations, i would underline that we need to ensure that central banks ’ operational frameworks are flexible enough to deal with extraordinary situations. in this respect, the eurosystem ’ s framework is very flexible. in terms of cross - border arrangements between financial authorities, i would stress the urgent need for enhancing cross - border arrangements between banking supervisors for dealing with weak banks. in fact, the global nature of financial markets and the increasing interlinkages between markets and institutions mean that the systemic impact of a financial crisis can only be properly assessed if supervisory authorities share information on the risk exposures of large institutions and on the impact of shocks in their jurisdiction. in addition, supervisory cooperation should be intensified on a cross - sector basis. indeed, all financial sectors are impacted by market developments as the boundaries between financial activities are becoming increasingly blurred. more broadly, all competent financial authorities, central banks, supervisors and ministries of finance should strengthen their coordination mechanisms for managing a crisis impacting cross - border financial institutions. in europe, an important step has been taken in this direction with the memorandum of understanding signed by the financial authorities of all eu member states in june 2008, which established common principles, procedures and terminology to be used by all parties involved in a cross - border crisis. conclusion we are experiencing a very challenging and demanding episode of the market correction which started more than a year ago and was due to a significant underassessment and underpricing of risks in global finance. this fostered extremely high risk – taking behaviour, excessive leverage and a widespread use of toxic, obscure and abnormally sophisticated financial instruments. in this regard, global finance was potentially unstable before the start of the turbulence and this was mentioned publicly, particularly in 2006 and the first part of 2007, by a number of speakers, including myself. the sub - prime mortgage crisis has therefore played the role of a trigger but there was a good deal of explosive around. my experience of previous crises is that it is extremely important to analyse situations very carefully and lucidly and never to underestimate its gravity. since 9 august 2007, we at the ecb realised that we were facing a very serious situation and drew all the lessons for such events not to be repeated. the same experiences lead me to think that crisis