models. in the more sophisticated neo - keynesian models, they managed to completely get rid of money! consequently, monetary policy could also get rid of money, and focus only on the interest rate as the variable representative of the equilibrium on the money and financial markets. with such models, it was sufficient to align the interest rate with the equilibrium level, or the so - called “ neutral ” level, in order to ensure a monetary policy in line with the general equilibrium. no one, however, asked, in a world of uncertainty, how to measure the “ neutral ” level of the interest rate. that was assumed as a given. this is the theoretical basis of the so - called taylor rule. nor was the crisis understood by those who continued to assume that financial markets were perfect, without frictions, in which the inflating and bursting of speculative bubbles is part of a moving equilibrium condition, in which economic policy should not intervene. in accordance with this approach, monetary policy, or the prudential supervision system, should not intervene in order to avert erratic market behaviour, which causes excessive flows of indebtedness and unstable dynamics in financial activities, but rather intervenes ex post, in order to reinflate the bubble when it bursts. doing it that way, by reinflating it, the bubble has finally burst with detrimental effects on the world economy. franco bruni ’ s book demonstrates that the excessively accommodative monetary policy following the dot - com bubble and 11 september fuelled the subsequent speculative bubble, which then burst in the summer of 2007. he himself acknowledges that the main responsibilities probably do not lie with monetary policy, but rather with the absence of regulation of new financial instruments, which permitted institutions to increase their leverage capacity and favoured the indebtedness of households and firms. however, monetary policy contributed to the build - up of imbalances by keeping interest rates very low, above all, during the period when the us economy was starting to pick up again. i believe that by now there is a broad consensus on this theory. alan greenspan ’ s counterargument that us monetary policy was not responsible for low interest rates, but rather the inflow of capital from china, is not convincing. even if there were any truth in greenspan ’ s theory, the lesson that should have been learnt was that the short - term interest rates were too low and should have been increased. it was decided not to do so for fear of

. 5 million persons under 25 are now without a job in the euro area – that ’ s almost one in four. in greece and spain the youth unemployment rate is over 50 %. absent a strong push for growth, there is a tangible risk to create a “ lost generation ”, as europe has done in a more tragic way in 1914 - 1918. this situation is undermining trust in national and eu institutions. 7 and it is worrying because we cannot resolve this problem by resorting to the nationalist solutions of the past. only a joint effort can reduce unemployment in a sustainable manner, using both national and european instruments. our first objective must be to reduce financial fragmentation in the euro area, which is illustrated by the different borrowing conditions in the various euro area countries and which has contributed – among other factors – to a divergence of investment and unemployment rates. stressed economies are also those where investment has decreased the most. 8 as a result, the average unemployment rate now stands above 18 % on average for the group of countries hit by financial stress, 9 whereas it is below 8 % on average in non - stressed countries. interestingly, these average unemployment rates were essentially the same before the financial crisis. against this background, what can european institutions do? the ecb has reduced its key interest rate, the rate at which banks refinance themselves every week, to a historic low of 0. 25 %. we have said that, in view of the subdued outlook for inflation, we expect interest rates to remain at current or lower levels for an extended period of time. additionally, we have taken several measures to ensure that euro area banks can pass on these low interest rates to the real economy, in particular where they are needed the most. the measures include providing banks with as much liquidity as they need – against adequate collateral. we have offered them the possibility of depositing additional collateral consisting of credit claims from their clients ( for example, smes ) directly with the ecb and have announced that we would intervene via outright monetary transactions ( omts ) to remove unwarranted risks to the integrity of the euro area. such support has benefited directly to the stressed economies, even though they ultimately benefit the entire region. these measures have been entirely in line with the ecb ’ s primary mandate of medium - term price stability. contrary to what is sometimes said, this objective has in no way constrained our ability to act and support the euro area economy at a time of crisis, when downward