, higher nominal wages would not lead to improvements in real purchasing power, but undermine job creation and fuel inflationary pressures. against this background, the ecb ’ s governing council considers that, features enforcing wage rigidities and leading to nonoptimal wage setting – in particular indexation of nominal wages to the consumer price index – should be avoided. this is particularly accurate in this period where the euro area economy is currently in a juncture which is dominated by exogenous price shocks and uncertainty about the outlook of the real economy. headline inflation which has been pushed up by external pressures on energy and food prices, is today significantly above 2 % in the euro area and even higher in spain. we must absolutely avoid the second round effects, namely that these price developments lead to futures increases of prices and wages and thereby prolong the period of high inflation and disanchor inflation expectations. finally, as regards labour supply, further reforms in income tax and benefit systems would help to increase people ’ s incentives to work. reducing disincentives to work, such as high marginal tax rates, high unemployment benefits, and encouraging people to work longer as it has been done in spain, 8 can stimulate the labour supply and employment of all workers, but particularly those with a generally more tenuous attachment to the labour market, such as women and older workers. furthermore, facilitating the use of flexible forms of work, such as part - time and temporary arrangements, may also contribute to the incorporation of certain segments ( e. g. the young, females ) into the labour market, hence increasing labour supply. 9 in this respect, the experience of some eu member states is telling. for instance, ireland and the netherlands – both euro area countries – as well as denmark, whose currency has been pegged to the euro within the erm since the beginning – have achieved success in reducing unemployment and stimulating job creation, despite significantly different economic conditions. 10 in december 2007 the unemployment rate in these countries was close or below 4. 5 %, while their overall employment rate was well above the euro area average. to achieve such remarkable success, these countries reformed their tax and benefit systems by reducing, for example, the tax wedge on labour income and by enforcing job search rules more strictly and a better monitoring of eligibility for unemployment benefits. they also increased the flexibility of their labour markets. what all these countries also have also in common is that they have significantly reduced product market regulation. this leads to the second prerequisite

recovery and resolution planning, set up a common toolbox of supervisory and resolution measures, and also establish some principles for cross - border cooperation. all this already looks like a huge step forward from the status quo, where national regimes are lacking the necessary resolution powers, and not harmonised with each other, either. moreover, we should not forget that in the single market major banks operate in more than a dozen countries via branches and subsidiaries. when fortis was broken up in 2008, only three countries were involved directly in its crisis management, but cooperation still proved to be difficult. that is why i strongly believe that the eu needs to make progress towards a truly integrated resolution regime that adequately mirrors the cross - border nature of its banking sector. first, let me mention that bank levies have been already imposed in several eu countries. although they are undeniably a burden on the financial sector, i believe collecting ex ante funds for resolution is ultimately beneficial for all parties, if the financial system becomes safer in the long run. but having purely national financing arrangements would again present the practical and political challenges of coordination and eventually sharing burdens among several countries. a superior option would be to collect levies directly at eu level. should this prove politically unfeasible, we would still at least need to have rules on how the national financing arrangements should together contribute to the overall resolution costs. pooling resources in a single pan - eu resolution fund would bring a number of positive elements into the resolution framework of cross - border banking crises : it would reduce the amount that would be subject to burden - sharing ; it would increase risk diversification and additionally provide the right incentives for cooperation. in any case, precise and transparent procedures and balanced decision - making mechanisms relating to the activation and use of the funds will be necessary to make it acceptable for member states. second, i also think that a pan - european financing arrangement is the pre - condition for an even more ambitious step forward, namely the establishment of a single european resolution authority. why would we need such a body? we have already learnt from past experience that crisis management and resolution calls for incredibly quick decisions. this typically means taking over a bank on a weekend and opening it for customers on the monday, for example in the form of a bridge bank. considering all the legal and technical complexities of such a move in a cross - border context, the only efficient way to do this is to have a single authority taking the lead and relying on national resolution authorities