. in fact, the one is a pre - condition for the other. i do not deny that there are negative demand effects in the short - term. but for the longer - term, sound fiscal policies are essential to lower borrowing costs and encourage investment. moreover, in those countries experiencing severe sovereign debt tensions, fiscal consolidation is unavoidable to maintain market access. that said, there is clearly a need to take measures to strengthen the growth potential of the euro area ’ s economies. these measures also need to have effect in the short - term so as to soften the short - term impact of fiscal consolidation. recognising this, the european council on 28 – 29 june agreed on a “ compact for growth and jobs ”. this compact aims to free up to 120 billion euro for growth and investment, representing roughly 1 % of euro area gdp. this comprises a 60 billion euro increase in the lending capacity of the european investment bank ; 55 billion through the reallocation of structural funds to growth - enhancing measures ; and 4. 5 billion of investment financing through a “ project bond ” pilot phase. on top of that, the european council took a number of measures to improve the functioning of the single market and facilitate adjustment within monetary union. the single market in services will be completed, which is expected to yield economic gains of up to 330 billion euro. to improve labour mobility within europe, an eu - wide recruitment tool will be developed and measures taken to strengthen the portability of pension rights and the recognition of professional qualifications. this strategy confirms an important evolution in the thinking of european policymakers. they are acknowledging that the smooth operation of the single currency requires flexible markets for goods, services, and labour. they are aiming to maximise the gains of the world ’ s largest single market, rather than acting as 27 national markets. and they are exploiting eu funds as a tool to support aggregate eu growth, rather than for quid pro quos between member states. reaping the full gains from economic integration in europe, combined with structural reforms at the national level, will help lay the foundations for more sustained growth going forward. 3. future of emu some observers, of course, question whether such a forward - looking perspective is relevant. this is due to the third criticism i outlined : the belief that economic and monetary union cannot work due to institutional flaws. in the view of these critics, the euro area is too decentralised, too diverse and too disunited

benoit cœure : short - term crisis management and long - term vision – how europe responds to the crisis speech by mr benoit cœure, member of the executive board of the european central bank, at cemla ’ s 60th anniversary commemorative conference “ central bank cooperation at the beginning of the 21st century ”, mexico city, 20 july 2012. * * * i wish to thank jonathan yiangou for his contribution to this speech. i remain solely responsible for the opinions contained herein. ladies and gentlemen, thank you very much for inviting me to speak at this session on central bank cooperation in times of crises. from the euro area perspective, central bank cooperation has worked very well during the crisis. we have had continuous dialogue since the early stages of the crisis in 2007, which continues to the present day. our network of currency swap lines with the federal reserve, the bank of england, the swiss national bank, the bank of japan and bank of canada have helped ensure foreign liquidity for the euro area and euro liquidity abroad. there has also been successful international cooperation through the imf. overall, these measures have played an important role in easing strains in financial markets. as the success of this cooperation is broadly recognized, i would like to use my intervention today to discuss a different and more contested issue : the management of the crisis by the euro area authorities. when i travel outside of europe, i am often struck by the level of misunderstanding of the euro area ’ s approach. the euro area is widely perceived as lacking a coherent strategy to calm markets and stabilise economic activity. it is also seen as the prime source of shocks affecting the global economy. indeed, i sometimes have the impression that global volatility is solely attributed to the shortcomings of europe, and that challenges to the sustainability of growth in other large economic regions are conveniently downplayed. at present, three critical views are particularly prevalent. • the first is that europe does not have the right tools to fix the crisis. • the second is that europe focuses only on fiscal consolidation and not on growth. • the third is that the euro cannot overcome its design flaws. while i acknowledge the reasoning behind these views, you will not be surprised to learn that i fundamentally disagree with them. in all three areas the reality is more complex. looking only at the outcomes of the european council and euro summit on 28 – 29 june, these critiques do not hold up. europe is making more progress than many