enough for a single currency? for example, shouldn ’ t its mandate include the role of lender of last resort? the role of lender of last resort is a traditional role for central banks and we fulfil it. this contributes to financial stability. the problem is that some economists and some politicians say that the central bank should stand ready to finance government deficits. this is incompatible with the mandate of a price stability - oriented central bank. this is why in the treaty there are clauses prohibiting monetary financing and guaranteeing central bank independence. in a monetary union, it is however important to have institutions that can support member states confronted with serious financial difficulties. if you don ’ t have that you face the permanent risk of instability. this is one of the lessons of the crisis and was the reason for creating the european stability mechanism ( esm ), a permanent crisis management institution. for the esm to properly play its role, shouldn ’ t it become a european institution, with joint decision - making at the “ community ” level? i mean, a federal institution instead of the present intergovernmental institution? it is essential for successful crisis management to have an efficient decision - making procedure, because crisis management requires effective and quick action. crises risk being exacerbated by decision rules, such as unanimity, that prevent timely decisions from being taken and cast doubt on the effectiveness of crisis management institutions. decision - making procedures of a federal nature are in this sense preferable to intergovernmental ones that often come with veto rights. in economic and monetary union ( emu ), emergency funding is basically provided subject to conditionality on economic and fiscal policies. it is not a transfer ; rather, financial support is granted to smooth the adjustment process. is this the correct way to deal with potential crises? i think so. it is a responsibility of member states to consider their economic policies as a matter of common interest and ensure sustainable public finances. adverse economic developments can put a member state under financial stress and bring about a need for reform. ill - designed policies, fiscal profligacy for example, can also eventually lead a country into crisis. it is a collective responsibility of member states to ensure a smooth functioning of emu and this is why they agreed that a crisis management framework was needed. the emu member states have lost the traditional adjustment tools to deal with shocks – 2 / 5 bis central bankers'speeches such as the devaluation of their currency – whilst emu

promise of peace, security and prosperity, and that it would accelerate the eu ’ s political integration. what went wrong? european integration is a process, and it is important to learn from the experience so far to make further progress. i would like to stress two points. first, emu came with too - high expectations, for example that the growth rates we had just before, or at the beginning of, emu would continue forever. many borrowed on the basis of those optimistic expectations. so there was a basic fragility in debt markets. the second thing was the absence of mechanisms to deal with debt overhangs. the crisis was the motivation for establishing the banking union and improving financial sector regulation. on your question : did the union deliver prosperity and security? the single market is a source of prosperity and it needs a single currency. the currency crises of the 1990s were very detrimental to the internal market. just remember the big exchange rate crisis we had before the monetary union in 1992 - 93. in belgium, for example, people were importing italian cars directly from italy, where prices were much cheaper. it was possible to do that in the internal market. then the car dealers and repair outlets in belgium started to discriminate against these cars because they were not bought in belgium. when going to a garage for maintenance, the car was put on a waiting list. in practice, non - tariff barriers were put up in response to the exchange rate effect. and that was jeopardising the very principle of the internal market. you would say then that for countries most hit by the crisis, such as portugal or greece, it would have been even worse if they were not in the euro? i think so. for small open economies, exchange rates can be very destabilising. that is why smaller economies usually try to peg their exchange rates to a stable currency. in the monetary union, insufficient attention was paid to competitiveness divergences, because such divergences build up over time, little by little, and at some point there is a need for a significant adjustment. we should have paid more attention to economic divergences. why? it is important for sound economic policymaking to identify at an early stage the erosion of competitiveness. for example, we should understand why germany was able to increase the value added in manufacturing during the crisis, while in other countries manufacturing suffered. what happened? why did german manufacturers do better? the decentralisation of labour negotiations