to financial stability in the euro area. the effectiveness of the esm is based on the idea of a strong deterrent : as long as markets believe the esm to be powerful enough to act in a crisis, they have much less incentive to speculate against any euro - area country. this principle is now being called into question by an idea that the president of the european commission, jean - claude juncker, has recently floated. he suggests using free esm funds to finance investments in infrastructure. in my view, such a step would greatly reduce the effectiveness of the esm. in a way, the discussion about liability and control relates to monetary policy. the governing council of the ecb recently decided to buy asset - backed securities. this decision represents a far - reaching change in the ecb ’ s monetary policy : the objective is not just to boost lending, but also to directly pump money into the economy. the effect of this measure would be to transfer credit risks taken by private banks to the central bank and, ultimately, to the taxpayer. were this to take place even despite the lack of an adequate compensation for the risks, we would have another specific policy measure that increases the imbalance between liability and control : bank owners would not be responsible for their credit decisions, leaving taxpayers to once again foot the bill. this contradicts nearly all the g20 initiatives that are currently underway. 3. banking union – tomorrow ’ s reality ladies and gentlemen, at this point in time, a fiscal union remains more of a vision than of a concrete step to be taken anytime soon. however, in another area, europe is about to take a significant step towards deeper integration. less than a month from today, the ecb will assume direct supervision of the 120 largest banks in the euro area – thereby erecting the first pillar of a european banking union. the 120 banks which will come under the supervision of the ecb account for more than 80 % of bis central bankers ’ speeches the aggregated balance sheet for the euro - area banking sector. thus, the ecb will become one of the world ’ s largest supervisors. the banking union is certainly the biggest step towards financial integration in europe since the launch of our common currency. and to me, it is the most logical step to take. single monetary policy requires integrated financial markets – which includes, without doubt, european - level banking supervision. european banking supervision will allow banks throughout the euro area to be supervised according to the same high standards.

. to be sure, the concept of a capital markets union is not as clear - cut as that of a banking union. capital markets are complex and non - bank finance takes many forms : corporate bonds, private equity, public equity, venture capital or peer - to - peer lending, to name just a few. and integration not just relates to financial products but also to integral elements of the respective markets, such as stock exchanges and central counterparties. thus, any attempt to form a capital markets union would require a lot of different measures in a lot of different areas. nevertheless, the idea of a capital markets union has gained some traction lately. among others, the president of the european commission, jean - claude juncker, and yves mersch, member of the executive board of the ecb, have promoted the concept of a capital markets union. to me, it would be a logical step to supplement the banking union with a capital markets union. it would reduce fragmentation in european financial markets and, at the same time, enhance their efficiency and stability. thus, it is certainly a goal worth pursuing. 5. conclusion ladies and gentlemen george washington is credited with having written, more than two centuries ago in a letter to a friend, that a united states of europe would come into being. this is certainly a bold vision which has been voiced repeatedly since the days of george washington – by winston churchill and, more recently, the former vice - president of the european commission, viviane reding. the vision of a united states of europe is a very broad approach aiming at an encompassing political integration. in my speech today, i have taken a more modest approach and argued from an economic point of view. i have highlighted three areas where deeper integration might help to enhance the stability of monetary union. the first area is public finances, although a fiscal union is currently a rather unrealistic vision. the second area is the banking system, and here we are on the eve of a major step towards bis central bankers ’ speeches integration – in november of this year, the banking union will become reality. the third area is capital markets. looking to the future, i consider a capital markets union another project that would contribute to enhancing the stability of monetary union. in my view, integration is the way forward as long as it is balanced. not all proposals for deeper integration that are currently being discussed fulfil this criterion. take the example of eurobonds : in essence, eurobonds would provide a joint