monetary union is therefore essential. this does not require a choice between extreme options. some observers have argued that long - term stability requires a return to the original maastricht framework. others have suggested that we need a full federation, a united states of europe. in my view, neither approach is necessary. we can ensure future stability by elevating to the european level only those policies that are essential for our union to function effectively. i have been asked to work on identifying these policies under the lead of the president of the european council and together with the presidents of the commission and the eurogroup. in our view, a stable and prosperous union must be built on four pillars. the first pillar is a financial union that can maintain a stable and integrated financial market. this implies a single supervisor to control risk - taking by banks and reduce regulatory capture – and a single resolution system to ensure that banks can fail without dragging down their sovereigns. as regards the commission proposal for a single supervisor that i mentioned earlier, i am confident that governments will find agreement on the appropriate perimeter of supervisory responsibilities, as well as issues related to democratic accountability. for our part, we will guarantee the firm separation of monetary policy from supervisory tasks. we will also ensure close cooperation with national supervisors who have the competence and resources to implement supervision. the second pillar is a fiscal union that can effectively prevent and correct unsustainable budgets. the consequences of misguided fiscal policies in a monetary union are too severe to remain self - policed. so a stable emu would ultimately require the establishment of true budgetary oversight at the european level. bis central bankers ’ speeches the third pillar is an economic union that can guarantee the highest standards for competitiveness. countries must be able to generate growth and high employment without excessive imbalances. this implies that there must be minimum standards for key economic policies and incentives for continued structural reform. the fourth pillar is a political union that can engage euro area citizens more deeply and make the other pillars legitimate. this is essential to ensure that where sovereignty in selected policy fields is pooled, democratic participation is deepened in parallel. a firm commitment from governments to complete economic and monetary union is the best complement to the ecb ’ s actions. it ensures that, by supporting immediate confidence, we will build the bridge to a more stable and prosperous euro area. and it sends a clear signal to investors that the euro area has a vision for a sustainable future. conclusion let me draw to a close

the experience of central and eastern european economies with the latest crisis would indicate a broad range of outcomes. while this might look normal at first view, it is worth remembering that cee countries share quite a few commonalities in their economic and financial structures. furthermore, they were hit by the same type of external shock, at exactly the same time. one has thus a fair approximation of a controlled experiment on the role of macroeconomic policies before and during the crisis. at the risk of generalizing too much, i would say that cee economies shared broadly the same development model and problems. we benefited from large capital inflows mainly in the form of fdi, remittances and cross - border loans. western european banks penetrated our financial system, increasing financial intermediation and facilitating capital inflows. this process resulted in fast credit and economic growth based on a consumption lead model. while inflation has been generally under control financial imbalances and vulnerabilities were increasing, in the form of rapid growth in real estate prices and balance sheet exposures in liquidity and foreign currencies. our economies were hit by the crisis since the first week of october 2008. the fear of contagion was enhanced further by a sharp decrease in the market value of the eu banking groups that operate in the region. it affected negatively the public trust in the system, resulting in widespread deposits withdrawals. later, as the financial crisis progressed and transformed into a global economic recession, the effects extended to real economy and exchange rate depreciation. most of the countries in the region faced a rapid liquidity shortage caused by the deposits run, lower remittances and fdi outflows. the balance sheets across the region suffered from both liquidity problems and exchange rate depreciation. this was negatively reflected in consumption and investment, which further deteriorated the financial stability outlook with the possibility of a balance sheet deflation and economic contraction mutually supporting each other in a vicious spiral. the ability of our economies to absorb these shocks was however different. the natural instinct of macroeconomic policies facing such a contraction scenario is to engage in countercyclical measures in the form of expansionary monetary and fiscal policies. however, the very presence of financial stability concerns in the equation significantly changed the equation. we can safely argue that countries which experienced the least macroeconomic and financial imbalances were the ones better placed to pursue countercyclical policies and in fact the ones which emerged the fastest from the