it ’ s not enough, it seems to me, to shrug one ’ s shoulders and say “ well, that ’ s what happens now anyway within individual countries ” ; at least within individual countries there are alternative adjustment mechanisms, in the form of labour mobility and fiscal redistribution, to moderate the tensions, which will be much less effective within the euro - area. the architects of the maastricht treaty clearly knew all about the beast, and they evidently shared my scepticism about it turning naturally into prince charming. the famous convergence criteria are there precisely in order to reduce the risks of tensions emerging after the start of the euro. one can argue about how far they do in fact reduce the risks. but it would be a reckless gamble to charge ahead if even those criteria were not met - sustainably, and in substance rather than just in form. so there needs to be a serious debate. but it would be disappointing if that debate degenerates into recrimination and antagonism. that would be to obscure the remarkable consensus that now exists - throughout the european union and indeed more widely, and across a broad spectrum of political opinion within the countries of europe, including this country, on the broad approach to macro - economic management. this unforced consensus extends to monetary policy directed to price stability, and it extends to budgetary policy directed to medium and longer - term fiscal sustainability. there is growing recognition, too, across the continent, of the importance of structural policy directed to supply - side flexibility. this strengthening consensus is fundamentally important - more fundamentally important, in terms of the economics of it at least, than whether these common objectives are pursued inside or outside the framework of monetary union. pulling these thoughts together, it would be a mistake in my view for monetary union to go ahead without reasonable confidence of genuine, sustainable, convergence between its members ; and it would be a mistake for any individual country to seek to join, or to be permitted to join, unless it had achieved genuine, sustainable, convergence. if there are serious doubts - generally or in any particular case - it would be in no - one ’ s interest to proceed. but it would be just as big a mistake, if monetary union does not go ahead, or for countries on the outside, if individual governments saw that as an opportunity to seek to take short - term advantage of the apparent macro - economic freedom that that gave. it would be against their longer - term national economic interest ; and countries be

financial stability board ( fsb. org ) or financial stability in focus : the fpc ’ s approach to assessing risks in marketbased finance | bank of england ; for an assessment of the implications of qt on market functioning see quantitative tightening : the story so far − speech by dave ramsden | bank of england ; for details on the iawg see collaboration toward increased resilience of the treasury market - federal reserve bank of new york ( newyorkfed. org ) ; and for discussions of the central bank toolkit see preventing and responding to dysfunction in core markets - dallasfed. org and a journey of 1000 bank of england circumstances, there are limits to the extent that banks can rely on private markets to monetise non - reserves hqla in a stress. figure 12 : bank of england facilities and daily volumes in selected sterling markets source : bank of england, mifid ii. repo and unsecured daily volumes are for overnight maturity transactions only. there is however another way for banks to monetise their assets, and that is by using central bank liquidity facilities. huge advances have been made in this area since the gfc. 16 as figure 12 shows, uk banks have built up the capacity to borrow over £½ trillion of reserves from us against a range of prepositioned, mostly less liquid, collateral – and they can borrow a great deal more than this against more liquid collateral, including hqla, if the underlying markets freeze. that collateral can be used across most of the bank ’ s lending facilities, including the weekly index linked term repo facility, the discount window facility, and the contingent term repo facility. we are definitively ‘ open for business. ’ miles begins with a single step : filling gaps in the central bank liquidity toolkit - speech by andrew hauser | bank of england. 16 for a recent summary see report on the bank's official market operations 2022 – 23 | bank of england. bank of england on the face of it, an aggregate borrowing capacity of £½ trillion is enough to meet most of the outflows in figure 7. so shouldn ’ t we be considering a radically different setup in which the stock of reserves is relatively small in normal times, but expands rapidly and at scale when needed, via usage of the bank ’ s facilities? there are three main obstacles to that being a complete answer : - first, while many banks have strong pre - positioning and test usage regularly, some do