competitive have on average seen higher business margins, lower public debt levels, higher growth, and higher employment. this correlation suggests that closing the competitiveness gap is a key component of improving the current economic situation. closing the competitiveness gap one way to regain competitiveness quickly is to address the numerator in unit labour costs – nominal wages. another, longer - term approach is to increase the denominator – to achieve higher productivity. in my view, in the euro area today we need both. on the first count, there are already some encouraging signs of rebalancing in the euro area in terms of cost competitiveness. thanks in part to the structural reforms introduced in several countries, relative costs are adjusting where they had become misaligned in the past. for example, spanish export volumes grew by more than 20 % since 2009. over time, rising mark - ups should allow spanish firms to expand capacity and increase hiring. but let me be clear here that i do not see competitiveness as a race between euro area countries with winners and losers. that is why the longer - term challenge of raising productivity is also key. while cost adjustments increase competitiveness only relatively, productivity gains, by increasing trend growth, can be absolute and benefit all countries. so how do we raise productivity? in my view the key issue is the connection between three “ i ’ s ” : innovation, investment and incentives. as innovation and investment mostly take place within the private sector, most interesting from a policy perspective are incentives – namely, the role that government can play in encouraging these other factors. take investment as an example. total investment in the euro area is currently 17 % lower than in 2007, while in germany and france, it is still 2 % and 6 % below 2007 levels, respectively. certainly, this derives in part from macroeconomic uncertainty, and in some countries from spare capacity. but there is also a strong microeconomic dimension linked to incentives. in many jurisdictions, some regulations deter private investment and hinder cross - border projects. this makes a strong case for fully completing the single market. more generally, firms ’ incentive to invest is linked to their optimism in the business environment. this is affected by issues such as the burden of administrative procedures, or bis central bankers ’ speeches the speed and quality of the judicial system. these are areas where governments, through reforms, are in a position to make a difference. measuring progress in these areas is not straightforward, but in one indicator that measures the overall

climate and follow up accordingly. as we build our joint supervisory teams ’ capacity to help banks understand and incorporate c & e risks, our supervisors will treat these risks just like any other. last year ’ s review was conducted by a central team of experts, with the joint supervisory teams conducting the follow - up dialogue with the bank. by contrast, this thematic review will be fully embedded in the work of every joint supervisory team. while still backed by a central team of experts, the review will be driven from the engine room of supervision. and this is where the supervision of c & e risks will stay. following up on the thematic review, all banks under our direct supervision will receive comprehensive feedback setting out any shortcomings identified. combined with the observations from the climate stress test, this will also be qualitatively integrated in the srep scores, which may have an indirect impact on minimum capital requirements. targeted qualitative requirements may also be imposed. as part of the review, we will also carefully check whether banks have followed up on any requirements we issued last year. the thematic review is a full - on supervisory review. as such, we also have the full set of supervisory measures at our disposal to address shortcomings. those banks that continue to fail to conduct a materiality assessment of c & e risks or have not followed - up on earlier requirements will start noticing just that. regulatory and supervisory framework the ecb is taking action under its mandate and under the current prudential framework to get banks to where they need to be in terms of incorporating c & e risks into their business. our 3 / 4 bis central bankers'speeches supervisory activities are thus keeping in line with the rapidly evolving regulatory and supervisory framework. for example, the revisions to the capital requirements regulation and directive proposed by the european commission will further articulate the integration of c & e risks in the legal framework and will require banks to develop transition plans and supervisors to scrutinise them. this is the next important step in risk management, which i have mentioned on previous occasions, and which will require banks to look thirty years ahead and devise intermediate targets for their risk exposures that can render their risk management practices fit for an economy that will transition to net zero emissions by 2050 at the latest. and finally, disclosure frameworks and taxonomies are also developing rapidly to create an information architecture to enable banks to manage the risks and scale up green finance. both the basel committee on banking supervision and the