to proceed. next steps include : completing the banking union, creating a capital markets union, creating a macroeconomic stabilisation function at the euro area level, possibly with a european treasury and a full european monetary fund. these institutional reforms would be crucial for the emu to face two of the most fundamental objectives to consolidate its future : increase its growth potential and restore a path of real economic convergence among its member countries. while at present the recovery is on track, looking ahead the growth potential of euro area economies needs to be strengthened. further efforts thus need to be devoted to strengthening productivity growth which requires an expansion of productive investments. both the recovery of productivity and that of business investments in the euro area has been lagging behind that of the us ( see slide 12 ). 12 / 16 bis central bankers'speeches slide 12 there have been important reform efforts in the euro area in recent years supporting the recovery of potential growth. since 2009 the reform responsiveness in the euro area has exceeded the oecd average ( see slide 13 ). in particular, countries which had financial assistance programmes took a number of reforms to improve their resilience and competitiveness, in particular through reforms in product market regulation, employment protection and wage flexibility, and through revamping of active labour market programmes. many of these reforms are expected to support potential growth but they tend to exert their full impact with a considerable lag. at the same time, the business environment in some of the euro area countries is still well behind that of countries near the frontier, and reform needs are significant. 13 / 16 bis central bankers'speeches slide 13 a final challenge relates to convergence of income levels in the euro area. gradual but real economic convergence of income per capita across all countries is the ultimate condition for a healthy and consolidated economic and monetary union prepared to resist the test of time. taking a long - term perspective 5 – from 1960 till today – and focusing on the twelve initial members of the euro area, it is striking that the euro area crisis ( 2010 – 13 ) was the only period when strong divergence materialised in the dispersion of gdp per capita levels. however, it is since about 1993 – well before the adoption of the euro – that this group of countries does not experience phases of marked income convergence, such as those recorded in the periods 1960 – 1972 and 1986 – 1992. the same applies to broader groupings of mature economies in the european union, such as the member states which had joined the

countries compared to the past, which also suggests increased business cycle synchronisation within the euro area. 2 / 16 bis central bankers'speeches the recovery is also broadening across sectors. the share of sectors with positive growth has returned to its pre - crisis levels ( see slide 2, chart on the right ). at the same time, the dispersion of growth rates across sectors is the lowest since the inception of the euro. taken together, the broadening of the recovery across countries and sectors suggests that it has not only gained momentum but, importantly, the recovery has gained robustness. slide 2 a more robust recovery has also been visible in the labour market where conditions have improved markedly ( see slide 3, chart on the left ). employment has risen by almost 6 million since 2013. this stands in contrast to the jobless recovery of 2010, which is another indication of the turning tides in the euro area. furthermore, labour market recovery is stronger in countries where it was especially weak. euro area unemployment rate has receded, despite still too high unemployment rates in some countries ( see slide 3, chart on the right ). 3 / 16 bis central bankers'speeches slide 3 notwithstanding these improvements, the growing uncertainty surrounding the strength of the world economic recovery, and of the us in particular, makes the normalisation of inflation and unemployment levels in the euro area more difficult ( see slide 4 ). 4 / 16 bis central bankers'speeches slide 4 adjustment and resilience the increased robustness of the euro area economy is also reflected in the gradual unwinding of the macroeconomic imbalances accumulated before the crisis. in fact, countries that eventually entered a programme had recorded large losses in price competitiveness in the run - up to the crisis. since the crisis, the initial dramatic increases in the real exchange rates of those countries have largely been corrected ( see slide 5 ) along with a marked improvement in price competitiveness. in most programme countries relative unit labour costs are now below their respective level in 1999. 5 / 16 bis central bankers'speeches slide 5 at the same time, the large current account deficits registered in several euro area countries before the crisis have narrowed significantly or even turned into surpluses ( see slide 6 ). importantly, the largest part of the current account adjustments is estimated to be non - cyclical and therefore likely to be sustained as the recovery continues. 1 from this perspective, it is very relevant that ( with the exception of greece ) the external account improvements