it must include effective arrangements for cross - border resolution. that has been an architectural faultline in the imfs for decades. 3 third, across the world the operational independence of prudential supervisors4 from shortterm politics depends on credible and effective resolution regimes. unless we can handle the failure of banks and other financial firms in an orderly way, it is hard for governments to tie themselves to the mast of eschewing the temptations of ‘ bailout ’ using taxpayer ’ s money. that would give them an interest in the day - to - day operation of prudential supervision which, as experience in some countries shows, all too easily morphs into attempts to promote and protect ‘ national ’ champions ; and to operate supervisory policy for short - term gain rather than in the interests of medium - term stability. in any countries where that persists, we should expect higher government bond yields than otherwise, reflecting the state ’ s contingent liability for the banking sector. unless we deliver effective resolution regimes, public finances will be under more pressure. so, summing up why the resolution reforms are so important : if you believe in solving too big to fail, in an international financial system that is not only free but also safe, in shielding taxpayers from the risks in banking, and in shielding banking from politics, you will be committed to making a success of resolution. thankfully, the extent of progress since the 2008 / 09 bailouts, while still incomplete and needing continuous political impetus, is good. it has involved agreement on a global model for resolution regimes capable of handling the largest and most complicated firms ; legislation in some, but not yet enough, jurisdictions to embed that regime ; the development of high - level resolution strategies that can be applied to different types of global group ; concrete steps towards agreement between countries on how to apply those strategies across borders to specific institutions ; and plans for top - level reviews of the adequacy of the resolution plans for each global sifi. if that progress has not been faster, which is an understandable concern, it is for the good reason that the required reforms involve an agency of the state, the resolution authority, having powers that affect property rights. in democracies, that is rightly debated thoroughly to ensure that it has this serious faultline in the international financial system was highlighted to the international community by a 2001 g10 / financial stability forum report explaining that officials did not then have the tools to manage the orderly wind down of a large and complex

ailing countries. that ’ s why it ’ s all the more important that expectations are met and that further reforms are not just announced but actually put into practice. 4. germany as a role model germany is an important role model in this respect. what germany has accomplished offers a vivid demonstration for its partner countries in the euro area that structural reforms pay off. at the same time, i would like germany ’ s current economic and social policy to set more of an example. i ’ m thinking particularly of the option allowing individuals who have paid into the pension insurance system for a long period of time to draw a full pension at the age of 63. after all, the decision made just a few years ago to progressively raise the standard retirement age to 67 served as a model for countries in which the pension systems were likewise feeling the strain of an ageing population. logically, raising the retirement age was part of the agreed stabilisation programme in three of the four programme countries. so the signalling effect of retirement at 67 was blurred to a certain degree, and pension policy seems akin to the famous dancing procession of echternach – two steps forward, one step back. “ retirement at 63 ” offers a financial incentive to take early retirement – there is a financial upside of up to €40, 000 for an average wage or salary earner, while higher earners reap even greater benefits. “ retirement at 63 ” is something which favours age groups that are currently close to retirement and punishes younger generations. that reminds me of groucho marx, who once said : “ why should i care about posterity? what ’ s posterity ever done for me? ”. it ’ s true that the increase in pension payments will not directly raise contribution rates on account of the high level of reserves. but from a medium - term perspective, it will drive up non - wage labour costs as well. another outcome of “ retirement at 63 ” is that workers that are still needed in the labour market will cease to be available. according to our calculations, “ retirement at 63 ” will diminish the labour force potential by around 165, 000 people by 2016. germany does not have enough workers going forward. in 2020, the number of workers available to the labour market will probably have shrunk by 1½ million compared with today ’ s figures. in 2020, this demographic effect will have depressed economic output by nearly €70 billion. if germany is going to address this problem, it