at some point in the future. here we must accept that we still have not dealt with the fundamental reason why systemically important banks cannot be allowed to fail. the truth is that, if tomorrow morning a systemic institution were to be on the brink of failure, we would again face the terrible choice of coming to its rescue or risking the stability of the financial system. the fact that financial institutions which are too big or too interconnected to fail exist is a flagrant contradiction of one of the key principles and beliefs on which any market - based economy is built : competition should ensure that the most efficient – and not the largest and most risk - loving – survive in the market place. it is evident that a change of rules is required. the financial system of the future should expose financial institutions of all sizes and structures to the test of the market place. in the event that some of them fail, we need a system that allows for the orderly resolution of large and complex financial institutions. in other words, we require a system that permits us to let systemically relevant institutions fail safely. one of the principal hurdles to achieving this objective is that it requires international coordination. many of you will argue that the notion that we could agree on an international framework for the orderly resolution of cross - border financial institutions is utopian. your skepticism is understandable. after all, much work has gone into trying to address this problem for at least 30 years, arguably with little concrete success. the many technical and legal problems have impeded any meaningful progress. despite this unfortunate track record, i would argue that the real problem has not simply been a lack of technical answers to admittedly very difficult problems. after all, where there ’ s a will, there ’ s a way. what we urgently need now is the political will to address the technical difficulties and to cooperate internationally in pursuit of a solution. in 1961, president kennedy announced to the world that the united states would go to the moon before the end of the decade. at that point, the nasa engineers clearly hadn ’ t solved all technical problems associated with landing a man on the moon. it seems to me that the key to solving these problems was a clearly stated political objective. much like john f. kennedy ’ s commitment nearly 50 years ago, we now need a bold and international political commitment to put in place a framework for the orderly resolution of cross border financial institutions. provided we have such an unequivocal commitment, solutions will eventually emerge. a new framework

has lost around 18 % of its external value in little over a year, regardless of whether this was judged to be the result of the strength of the us dollar rather than any intrinsic weakness of the euro itself. it is worth noting, however, that the euro was launched at a time when the euroland currencies were particularly firm against the dollar - having climbed, in the case of the deutsche mark, by almost 50 % since its low point in 1985. against this background, and the widening of interest differentials in favour of the dollar in recent months, the direction of the euro ’ s movement is, with hindsight, hardly surprising. the depreciation of the euro is of course a fact, and it is perhaps the only concrete basis for the scepticism that one hears being expressed about the euro. but, from what i gather as an observer from afar, there are a number of other factors, less tangible, which also contribute to that scepticism. i shall go through some of them with you, noting once again that perception from many miles away may indeed be quite different from reality. the first factor concerns structural rigidities, which appear to observers from my side of the world to be more serious in euroland than in many other economies, big and small. the severity of these structural rigidities is seen to be undermining the ability and the efficiency with which euroland can respond to change. of course, we recognise that some loss of adaptability may be the price that has to be paid for a relatively stable society and a comfortable social safety net, and that the trade - off has effectively been arrived at through a democratic process. but it is hard to believe, as an outsider, that the trade - off is an optimal one. i cannot imagine, for example, what goal of social stability could justify labour market and social security arrangements that deliver an unemployment rate of double digits ; or contribute to delaying, if not preventing, the arrival of the “ new economy ” in euroland. i understand that some still do not believe that there can be a new economy, in which the technological revolution enables productivity gains that are capable of sustaining a much higher rate of non - inflationary growth. of course, we should always question and critically examine any unusual phenomena, rather than embrace them blindly. but, meanwhile, investors are putting their money where this unusual phenomenon is allowed, by structural flexibility, to be manifested in full force, notably in the united states