the financial system, in the same way as the stability and growth pact binds national fiscal policies. some progress has been made towards implementing a single rule book within the eu, but margins for national discretion remain. furthermore, the mechanisms for cooperation bis central bankers ’ speeches among supervisors mainly apply to large and complex banking groups and operate at eu level rather than the euro area level. it ’ s the smaller and local banks that have proved to be much more risky and burdensome for taxpayers. these issues have not really caught the attention of the political authorities ; no concrete proposals to address this issue have been made. but it ’ s an important and urgent matter. conclusions to conclude, when looking at how to improve the institutional framework underlying the euro, we should avoid reasoning only by analogy, as that often leads to a comparison with the united states. the crisis has shown that even politically integrated federations like the us encounter major difficulties, and the fact of having only one decision - maker does not necessarily mean that the right decision is made. i actually think that although europe ’ s cultural diversity and complexity might render the decision - making more cumbersome, in the end it ’ s wiser. excesses in one direction or another, which would have been the case if decisions had been taken only at national level, have been avoided. euro area members had to consult each other and come to an agreement. no country was allowed to fail like lehman brothers – but no country was bailed out for free and without strong conditionality. the decision to start the consolidation of public finances earlier rather than later, which characterised the transatlantic divide at the london 2009 g20 summit, proved to be appropriate. inflation expectations remain anchored. and the euro is viewed as a solid currency. the adjustment process which started in europe is tough and will require continued efforts, but it is changing the structure of our economies in a way which will make them more resilient and more efficient. this is the best way we can face up to the challenges of global competition. bis central bankers ’ speeches

council adopted a procedure to enhance macroeconomic surveillance in the euro area, on the basis of indicators such as unit labour costs, current account imbalances, etc. the ecb contributed to this debate by proposing a traffic light system to warn about emerging competitiveness losses. the problem lies in devising a system of governance to assess competitive positions. it has to be restricted to the euro area, i. e. 17 countries at the moment. it cannot be at the eu - 27 level. why not? because problems of competitiveness within a single currency are very different from those of countries with their own currencies. i suppose i don ’ t need to give concrete examples to convince you of this. currently, the only 17 - country european body is the eurogroup, an informal grouping consisting of the finance ministers of the euro area. the bis central bankers ’ speeches eurogroup mainly deals with issues for which the finance ministers are responsible, notably budgetary policies and international financial issues. competitiveness depends on many other aspects, such as labour and product market regulations, which generally do not fall within the competence of finance ministers. the ministers who deal with these other matters are typically not faced with issues related to the euro area. and all council formations in the eu meet in full composition only, i. e. at the 27 - member level. the heads of state and government have met, in euro area composition, on numerous occasions during the crisis, starting in october 2008, when they decided to intervene jointly in support of the financial system. there was concern about and even opposition, in germany as well, to a more systematic role being given to the euro area composition of the european council and possibly other formations of the council. it was feared that this would interfere with, or be a counterweight to, the ecb, and would undermine its independence. the experience of the crisis, and of the first decade of the euro, is that the ecb has remained fully independent and has nothing to fear from a more cohesive euro area governance. on the other hand, the lack of a strong decision - making body at the political level may unduly constrain the effectiveness of and overburden the ecb ’ s actions. the crisis has also shown what the founding fathers of the euro knew all along, i. e. that monetary union means much more than adopting a single currency. it entails a high degree of political union, for it requires many more decisions to be taken