imbalances. but even the best rules only work if they are respected. and even the best rules may not prevent a country from experiencing economic shocks.... but union also means community for cases where these shocks are too big to be absorbed at national level, a monetary union needs mechanisms to spread the ensuing costs over more than one pair of shoulders. and this brings me to the second question : how can risks be shared at european level without a transfer of risk occurring which distorts the incentives for the individual member states? i mentioned this earlier : during the crisis, risks were shared especially by way of mutual guarantees and thus via national budgets. however, such a sharing of fiscal risks can reduce the incentives to pursue sound fiscal policies. in order to counter this disincentive, both the risks and the monitoring would therefore have to be shared at european level. so the presidents of the european institutions 3 – including the ecb – are calling for stronger fiscal integration leading to a fiscal union. for the moment, i see little political will to create a european fiscal union. fiscal risk - sharing, for the time being, therefore remains a problematic issue. as long as the basic willingness to share fiscal sovereignty is lacking, we could and should then agree that sovereignty will be relinquished if a member state does not comply with the jointly agreed objectives, such as the deficit and debt limits. at the same time, it ’ s necessary to strengthen national ownership and private risk - sharing. from an economic perspective, it would seem obvious : if a state gets into financial difficulty, why shouldn ’ t the state ’ s creditors bear the losses? in reality however, this is not so easy to implement. bear in mind how long it took to arrange that for the resolution of banks their creditors will also be liable in the future. where does the problem lie? it lies in the possible contagion effects and in concerns about financial stability. the creditors of countries are in many cases the domestic banks. a state bankruptcy with a bail - in could therefore trigger a financial crisis. masuch, k. ; moshammer, e. ; pierluigi, beatrice ( 2016 ), institutions and growth in europe. centre for european policy studies ( ceps working document no. 421 ). “ completing europe ’ s economic and monetary union ”, presented by j. - c. juncker, in close cooperation with d. tusk, j. dijsselbloem, m. drag

all the more important given that the ecb is implementing new, unconventional monetary policy instruments. the financial markets seem to think that the ecb will boost its very accommodative monetary policy of purchasing assets, or “ quantitative easing ”, from december … are they right? the decision has not been taken. the debate is ongoing. the euro area ’ s recovery is on track and gaining momentum, but still weak, as inflation expectations are not rising and core bis central bankers ’ speeches inflation has levelled out. in december the eurosystem staff macroeconomic projections will inform our decision. given that the ecb has already sent strong signals to the financial markets, aren ’ t you obliged to act now? no. the decisions we take are based on the economy, not financial markets. we are currently asking ourselves the following question : are some factors, such as the fall in the price of raw materials, temporary? or rather, will they prevent in a lasting way inflation from returning towards 2 %? if the answer to the second question turned out to be yes, additional measures would be taken. in december we will take a decision based on the information we have available to us. in december the us federal reserve system ( fed ) will take a decision on whether to maintain its key rates at zero or increase them. will their decision influence yours? it will have no direct impact on our decision. whatever the fed decides, our monetary policy framework ( zero rates, liquidity, “ forward guidance ” and asset purchases ) allows us to keep interest rates low, no matter what happens in the rest of the world. our policy protects the interest rate curve for the euro area from external shocks. what interests us above all is what the fed ’ s decision tells us about the us economy. if the fed were to raise its rates, it would be a sign that growth and employment indicators are robust in the united states. this, essentially, would be good news for europe. despite all of the ecb ’ s efforts to inject liquidity, large companies in the euro area are sitting on mountains of cash and not investing … monetary policy is supporting the recovery in demand and has removed a key obstacle to investment – financing. but obstacles remain on the supply side. weak investment, even though financing costs are low, shows that there is a dearth of projects that are sufficiently profitable in the long term. this reveals a lack of productivity and innovation. the ecb cannot do much about that. on