only return to the levels at which we want to see it if we have clean bank balance sheets. if you have banks sitting on a substantial amount of nonperforming loans or suffering from a lack of capital, they will not lend. this element of the banking union is key. the ecb will do this before assuming banking supervision and it is the precondition for lending to revive. is this, do you think, your most important contribution, rather than lowering interest rates or providing more liquidity through another longer - term refinancing operation? in general terms there are three reasons banks don ’ t lend : a lack of liquidity – and that is not the case on average in the euro area today, with the banks repaying the two three - year ltros ; a lack of capital, which cannot be addressed by the ecb but is a matter for bank shareholders and, if that is not possible, fiscal backstops ; and heightened risk aversion. we provide liquidity as needed and will do the comprehensive exercise. there are very different perceptions in italy and your own country about the respective other country and about what the ecb should do. i now look at this question as a european with a german passport. this is what makes our job interesting and difficult at the same time : the european perspective. i travel a lot around germany and talk to people and hear that we at the ecb are doing too much, exceeding our mandate. someone even took us to the constitutional court on that. in italy, people ask : why don ’ t you do more? i take note of both perceptions, but we do what is needed to ensure price stability in the euro area as a whole. we are the central bank to all 17 countries. lack of growth remains a huge issue. where will growth come from in the euro area? in the second quarter the euro area came out of recession after six quarters. that is good news, but it ’ s very, very gradual, fragile, uneven and with downside risks. the major source of future growth is growth - enhancing structural reforms. we always look a bit inward : what is germany doing, versus italy, versus france? but the key question is : how can we europeans compete globally in the economy of the 21st century, where we have new competitors, which are much stronger than 10 or 20 years ago? we need to cooperate much more, deepen the internal market, join forces with cross - border mergers – even

in banking, where they are very rare ( notwithstanding unicredit - hvb ). the aim in the end is to create jobs. unemployment at this level is unacceptable. one in four young people in europe are out of a job. as structural reforms take time, we need to resort to active labour market policies, like vocational training. otherwise, we risk a lost generation. bis central bankers ’ speeches the little growth there is comes from exports. german and italian companies meeting in bolzano this week raised the question of the strength of the euro. our answer does not change. we don ’ t have an explicit exchange rate target. the exchange rate is factored into our inflation and growth forecasts. but is it too high, is it overvalued, does it worry you? a in nominal terms and in real effective terms, which is more important, it is within the band we have seen for the last ten years. i don ’ t have any specific worry on the exchange rate. it only concerns me as it factors into our inflation forecast. you are directly involved in the negotiations on the banking union. single supervision was agreed, but on single resolution there are still wide differences. time is running short, because of the end of the legislative term of the european parliament in the middle of next year and the uncertainty in germany about the next government coalition, which will delay decisions. we want a banking union with all its elements, which includes a single resolution mechanism with its three components : a european resolution regime, a european resolution fund and a european resolution authority. and we want it in place close to the time single supervision starts in november next year. it is ambitious but doable. the european parliament will stop working in april. that means finishing the law - making beforehand. that is why, from a european perspective, it so important that a major member state will form a new government soon. then we can have a european council position that will pave the way for legislation. this is in my view the biggest task ahead of us in the next few months. it is of the utmost importance, because it will provide a key contribution to reducing the fragmentation in the euro area. the german government has said that treaty revision is needed for a single resolution authority and it doesn ’ t agree on the use of the european stability mechanism for the recapitalisation of banks. we want a joint regime, a joint fund and a joint agency. the ecb lawyers agree with the