adopting measures to achieve a primary fiscal surplus. i recognise that implementing these measures is challenging. and the starting point is, in many cases, unfavourable. disinflation to improve price competitiveness may serve to increase the real burden of a country ’ s debt overhang. but there is no alternative to these measures if monetary union is to work effectively, and the countries concerned are to regain the stability and prosperity that they seek. and, in all cases, convergence has to be with the best performer in the euro area. we cannot accept any weakening that would be implied by the averaging - out of the performance of all member states. indeed, all countries have homework to do : there is much scope for improvement even in the strongest countries if the benefits of price stability are to be fully reaped by the people of europe. the responsibility for fiscal and structural policies remains at national level. but we may need to consider some policy areas where, in order to ensure the stability of monetary union and the euro, more responsibilities should be assumed at area - wide level. the financial crisis has demonstrated that a lack of financial integration can complicate the implementation, and threaten the effectiveness, of the single monetary policy. policy interest rates can only guarantee price stability when their transmission to the economy is effective and reasonably uniform. to ensure such transmission, we need greater harmonisation in financial supervision and regulation. these are tasks that should be performed at euro area level. harmonised financial supervision and regulation will also support deeper financial integration within the euro area. in turn, such integration will foster risk - sharing and improve the shockabsorbing capacity of monetary union. some of the vulnerabilities of the euro area we have seen in recent years stem – at least in part – from the fragmented nature of the european financial sector and the supervisory regime that supports it. what we have witnessed over the past few years in financial markets represent the growing pains of the euro, not its death throes. with the necessary actions taken at national and areawide level, i am confident the euro will go from strength to strength. thank you for your attention. bis central bankers ’ speeches

lorenzo bini smaghi : one size fits all? speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the 16th annual conference of the german - british forum “ the european central bank in a global perspective – central banking and the challenge of rising inflation ”, london, 26 may 2011. * * * i wish to thank huw pill and oreste tristani for their contributions to the speech. i remain solely responsible for the opinions contained herein. ladies and gentlemen, it is a great pleasure to speak at this german british forum on the important issue of “ the european central bank in a global perspective – the challenge of rising inflation ”. i would like to address an issue which is raised time and again, namely, can the monetary policy implemented by the ecb fit different underlying economic performances in the member states of the euro area? and in the current situation, the question is often asked whether the ecb ’ s monetary policy doesn ’ t risk hampering the recovery in the euro area periphery and jeopardising the implementation of the adjustment programmes. as i said, the issue is not new, but it is certainly topical. i am sometimes tempted to answer that this is not the right question, or at least that the question comes too late, given that we now have had a monetary union for more than 11 years and there are no alternatives in sight. but i realise that some more structured answers have to be given at some point, and that ’ s what i would like to do today. as you all well know by now, the ecb has been assigned the primary objective of maintaining price stability in the euro area. the ecb therefore has no choice but to take a euro area perspective : its policy decisions aim at area - wide price stability. those decisions draw on all available information, including that deriving from national indicators, but they cannot be tailored to the specific needs of a single member state. as we have seen, economic divergences can emerge and persist across countries and regions within the euro area. in principle, there are several reasons why such variations in growth or inflation may emerge within a monetary union. initial differences in the level of development or income may lead to some countries catching up with the area - wide average through a period of faster growth, associated with relative price changes. 1 certain economic shocks may affect the economic performance of one country but not another. 2 the transmission of monetary policy may differ