the 1930s. not surprisingly all advanced economies, being stressed by the worst financial and economic crisis since world war ii, are called to reflect on the weaknesses of their economic and financial structures and on the appropriate reforms to redress their medium and long term macroeconomic and macro - financial strategies. this is the case in the united states. this is the case in japan. it is the case in the european union and in the euro area as well. my plan for tonight is precisely to assess the institutional framework of the euro area by highlighting the origin of the tensions we are currently experiencing and the plausible solutions that would help to restore market confidence and consolidate the building blocks of emu. thucydides ( 431 bc ) : the history of the peloponnesian war ( translated by richard crawley ). as its name suggests, “ economic and monetary union ” has two attributes : one is “ economic ” and one is “ monetary. ” the monetary attribute of our union refers to the ecb, its mandate and its independence. the “ economic ” aspect of our union comprises the fiscal regime enshrined in the stability and growth pact ; the national frameworks of economic policy, including macroeconomic policy and financial supervision ; and the system of mutual surveillance. the developments we are currently witnessing in europe ’ s economy have to do with its “ economic ” functions. they have essentially three origins : unsound fiscal policies in a number of member states ; inappropriate macroeconomic and supervisory policies in a number of member states ; and overall an inadequate system of surveillance. this is the triangle that lies behind the current situation. and let me make this very clear : the triangle does not include monetary policy. * * * the “ monetary ” side : price stability in the euro area the “ m ” side of the emu is relatively straightforward to assess. the treaty assigns the ecb the primary responsibility for maintaining price stability in the euro area over the medium term. we now have almost 12 years of experience with the euro : this is a sufficiently long span of time to provide an evaluation of how successful the ecb has been in delivering on its mandate. you all know that from the outset the ecb has set itself a very clear numerical benchmark, which is a public and transparent yardstick. the ecb ’ s governing council has defined price stability to be an annual rate of inflation in the euro area of below 2 % over the medium terms. the governing council has also declared that, in pursuing its

fiscal surveillance for the euro area the highest degree of independence possible within the commission, ideally supported by a body of “ wise persons ” providing external assessments. let me conclude with an example that demonstrates that in europe policymakers can make bold steps when and where necessary. i am referring to the recent decisions of the european council and the european parliament to create the european systemic risk board – or esrb – which i shall have the honour to chair. this new european body will be part of the new european system of financial supervision and its function will be to provide macro - prudential oversight of the eu financial system. it will bring together the governors of the national central banks, the new european supervisory agencies, the commission and the national supervisory authorities of all 27 member states. the establishment of the esrb will be a landmark event in how europe deals preventively with systemic risk. it will complete the european construction in the direction of adding safeguards that will stabilise the financial system and make europe ’ s economy more stable and resilient in the medium terms. furthermore, it will facilitate multilateral dialogue and cooperation in the field of macro prudential oversight with similar institutions in other countries, including the us and the newly created financial stability oversight council ( fsoc ). conclusion the ecb has, i trust, been living up to its responsibility and delivered what had been promised to our people : a stable currency that has promoted economic growth and job creation. this has not been an easy journey and we had to drive on rocky roads and absorb various shocks, including food and oil price gyrations as well as the consequences of the terrible terrorist attacks in the us. over these years, the euro has always been a force for stability and it remains so also in what is now a more than three - year period of economic and financial instability. in europe, as in all other major advanced economies, we are now called to react to the challenges posed by the crisis. changes are needed in the euro area involving both our economic models and surveillance frameworks. taking into account the lessons to be drawn from the global crisis in terms of functioning of the economic union, it appears of the essence to pursue greater cooperation and greater cohesion through a economic governance that will be considerably reinforced. we must keep our sense of direction : towards more european unity and more responsible european unity. thank you for your attention.