that the pace of recovery will be uneven and we cannot rule out setbacks. for another, we are still facing numerous challenges regarding the reform of our financial system. finance must play a constructive role, and not a destructive one, in our economies. the litmus test for a constructive role is that finance serves the real economy. to ensure such a role, we still need to improve the functioning of financial systems considerably further. thus far, a great deal of attention has been focused on the banking sector. but effective reforms also have to look very closely at non - bank financial institutions and at the set - up and functioning of financial markets. financial markets are not always efficient. they are not always deep and liquid. nor do they always represent a fair competition of views and positions. often, specific market segments can be oligopolistic, dominated by a few large players. in such markets, the views of powerful players can trigger trends that move valuations way out of line with fundamentals. we have to devise mechanisms and incentives to ensure that finance does not spiral out of control in the destructive way that it did just prior to the crisis. we have to contain systemic disruptions that lead to economic hardship for the people of europe. setting up the european systemic risk board, legislation for which is currently being considered by the parliament, is part of the correct response to this challenge. there are other challenges facing the european economy, and these are associated with public finances and sovereign financial health. within europe ’ s economic and monetary union, there is a clear allocation of responsibilities. with respect to that allocation of responsibilities, everyone can count on the commitment of the ecb to maintain price stability in the euro area as a whole over the medium term. meanwhile, we have not only this commitment, but we also have a track record of nearly a dozen years. based on our latest staff macroeconomic projections for this year, the average annual inflation rate in the first 12 years of the euro is likely to stand at around 1. 95 %. that is in line with our definition of price stability : “ below 2 %, but close to 2 % ”. the ecb ’ s commitment, strategy and track record are consistent. but the smooth functioning of europe ’ s economic and monetary union cannot rest on a single pillar. emu rests on two pillars, the monetary and the economic one. policy - makers at the national level must likewise contribute to the success and stability of emu and they need to deliver

1992. in short, the single market is now becoming a reality. work on the remaining imperfections of the single market is also advancing. we must not forget that this process has required many decades and continuous political support. why, in the last 50 years, did economic integration face fewer obstacles and actually keep in motion the process of european integration? the main reason is that, from the outset, economic integration removed barriers and thereby secured material and economic benefits. in fact, it has brought widespread benefits by promoting reciprocal trade. trade in fact has grown by several multiples. economic integration has also helped to establish a more competitive environment. we must also not forget that economic integration has rendered all eu countries more interdependent than in the past. under these circumstances, spillovers from national policies could be significant. each country has a stake in the well - being and, let me say, “ good behaviour ” of its partners. given such circumstances, the conviction underlying the maastricht treaty was that nominal exchange rates should be irrevocably fixed to achieve and maintain a truly unified single european market. without a single currency, it was felt that the achievements and deepening of the single market could be endangered. it was a political decision to launch european economic and monetary union among a group of countries, which did not form a fully - fledged political union. taking stock, we may ask : was this move appropriate and well founded from an economic standpoint? for a moment, i want to go back to research on the economic arguments for – and against creating a monetary union. in the 1960s, a group of researchers – following the pioneering contributions of mundell, kenen and mckinnon started posing a crucial question : from a purely economic point of view, what is the optimal area for a single currency? the optimum currency area ( oca ) theory that ensued is well - known to you all and i don ’ t have to say much about it. it is not easy to summarise the many views on the euro area as an oca, or to sum up the vast volume of empirical studies of all oca criteria for european countries. the euro area may not yet be an optimum currency area in all respects to the extent that, for example, the united states is. on the other hand, it scores quite highly under several oca criteria – such as economic openness, diversification in production and consumption, degree of price stability, and several elements