than threats to financial stability, perceived as risking their savings. such threats can have direct effects on citizens ’ frustration with european institutions and traditional political parties associated with them. moreover, regulation - driven consolidation has become an imminent risk, fostering concentration at local level and the comeback of too - big - to - fail. existing regulatory requirements were not thought of as a way to promote consolidation but are currently working in that direction. driven by profitability and efficiency concerns, recent calls for the creation of pan - european banks capable of competing with larger institutions outside europe as a matter of national sovereignty have added pressure on regulators and policymakers to review existing rules. this in turn has implicitly put on the table the return of too - big - to - fail with the ensuing moral hazard, raising further bailout expectations. it also undermines the level playing field within the euro area as fiscally strong countries can support their banking systems, while others cannot. 1 looking ahead, it is essential to ensure at eu level the separation of supervisory from regulatory functions for the political legitimation of regulatory standards. the overlap of regulatory and supervisory territories guarantees compliance with the principle of central responsibility for financial stability. before concluding, and as promised at the beginning of my address, i would also like to spend a few minutes on the challenges faced by the portuguese economy in view of the interest expressed by some of you. as you well know, in the first half of 2011 portugal had to resort to official financing under an assistance programme negotiated with the european union and the imf. the programme ended in 2014. public and private indebtedness had accumulated as a result of a credit boom since the mid - 1990s, with the bulk of credit being channeled to financing consumption and low - return investments, largely in the non - tradable sector. as the international and european crises unfolded, the high and rising level of external 3 / 5 bis central bankers'speeches indebtedness, coupled with weak growth of potential output, fuelled investors ’ concerns about our capacity to pay back our debts. this ultimately resulted in the country ’ s inability to fund itself on the international markets. the adjustment programme has widely been regarded as a success. in my view, this success was due to three factors : 1. programme ownership. portugal was committed to the implementation of the programme, it was accepted by the population and there was a constructive dialogue with social partners. this ensured the success of the quarterly reviews. 2. the speed and intensity

relative rise in uk, and us, interest rates, reflecting the relative strength of our cyclical positions compared with those in japan or continental europe, are overdone, and they should in any event reduce as recovery takes hold in those other countries. and present market perceptions of the euro as a potentially weak currency if the maastricht convergence criteria are not rigorously enforced, may also come to be seen to be exaggerated. there is in fact some suggestion, in currency options prices, that markets see a larger downside than upside risk to sterling against the dm in the course of this year. in the meantime, policy judgments are likely to remain unusually difficult. when we confronted a similar dilemma in the 1980s, the domestic expansion was allowed for some time to continue unchecked, but in the end we were driven to bring it to a jarring halt. i do not suggest for a moment that we are anywhere close to that situation now. our aim is precisely to avoid that. but that experience does illustrate that, in the final analysis, there could be real dangers in allowing justified concern about the exchange rate to deflect us for too long from moving gradually to moderate the upswing. i emphasise the words “ gradually ” and “ moderate ”. the choice ultimately in this situation is not whether or not ; it is sooner or later, less or more. our present dilemma - and it is a real dilemma - serves to illuminate the debate about the economics pros and cons of european monetary union, and the difficult decisions that will face all eu countries in little over a year from now. on the one hand, the real attractions - to manufacturers in particular - of exchange rate fixity within the euro area, are amply apparent. on the other hand, our dilemma - and we are not alone in this dilemma within europe - points up the problem that would arise if the single european monetary policy - the single interest rates - does not meet the domestic monetary policy needs of all the euro - member countries. this could happen for a number of reasons - related to different cyclical positions, different fiscal positions, or as a result of external shocks or structural changes. the famous maastricht criteria for sustainable convergence that are to be met, according to the treaty, before a country qualifies for the single currency were designed precisely to reduce the risks of tensions of this sort arising after the start. i should like to think that the political leaders across europe, who