the words of jean monnet : “ people may accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them. ” and indeed, europe has already undertaken major steps to tackle the identified weaknesses within the existing treaty. 1. in the absence of a nominal exchange rate the alignment of national fiscal policies and the prevention of imbalances via rules is a necessary condition to support the credibility of the single currency. the recent agreement reached by the european parliament and the council on the “ six pack ” is a step in the right direction. the stability and growth pact has been strengthened ; imbalances and competitiveness will be monitored at an earlier stage. 2. since the beginning of this year, the european systemic risk board and the european supervisory authorities are operationally. these truly european bodies are responsible for providing the incentives to avoid excessive risk taking in the financial industry and to promote a level playing field in support of beneficial financial integration within the euro area. 3. a crisis mechanism has been set up and is still being improved. countries with stressed liquidity positions which are subject to market attacks receive financial aid from the luxembourg based european financial stability facility ( efsf ). this support should allow them to return to a sustainable level of debt and regain competiveness as soon as possible. 4. in order to eliminate any doubts on the sufficient fire power of the efsf, governments of the euro area member states plan to provide appropriate leveraging of the fund. the efsf will operationally be allowed to intervene in the primary and secondary markets as soon as possible to tackle fundamentally unfounded distortions in the sovereign bonds markets. these distortions hamper the smooth functioning of the single monetary policy stance. samuelson, p. a. ( 1994 ), facets of balassa - samuelson thirty years later, review of international economics 2 ( 3 ) : 201 – 226. bis central bankers ’ speeches within the given framework, the implementation gap must be closed to resolve the confidence crisis that the euro area currently faces. most of the above mentioned proposals have been decided already. as soon as possible the new governance rules must be applied completely and rigorously. moreover, as stated earlier, factor mobility in particular on labour markets is an important adjustment mechanism. labour mobility within the euro area works rather smoothly at the lower and higher skill ends. but the high share of closed public service in europe, nonportability of pension rights, rigid labour laws and cultural differences

the protection of investors and creditors, or depositors. additional tasks such as responsibility over market conduct, consumer protection and market competition are unified to a larger or smaller extent. each national central bank is responsible for ela to financial institutions domiciled in its territory with the obligation of informing the ecb. beyond national banks, the ecb also manages the overall liquidity of the euro area according to market needs. but the ecb does not have direct supervisory authority, and many central banks have few prudential supervisory responsibilities. an eu umbrella superstructure seeks to facilitate cooperation across national stability frameworks. many mous have been signed to obtain a regular exchange of information and cooperation, and some mous have been signed to deal with banks of regional systemic importance. colleges of supervisors are responsible for monitoring insurance groups and some banks. lamfalussy committees have been established to promote financial integration and make proposals for the coordination of regulation and supervision in the eu. level 3 committees, for instance, develop guidelines for the functioning of supervisory colleges and the assessment of financial sector vulnerabilities that are reported to the financial stability table of ecofin. eu regulations are applicable to all eu countries ( e. g., crd, mifid, and solvency ii ), but countries can choose the form and methods to implement those regulations nationally. sometimes national options are numerous : in the crd more than 100 options were exercised! the eu commission has enforcement powers in matters related to the completion of the common market, and thus on mergers and acquisitions of financial institutions and injections of state capital. finally, international organizations and international standard setters such as the bis, the imf, the fsf, iais and iosco also affect eu legislation. the current eu financial stability framework is a rational outcome of a long evolution, but the current financial crisis, by highlighting its limits, suggests a rethinking is timely. the attribution of responsibilities at the lowest level that can effectively meet them, the principle of subsidiarity, has served the eu well. yet, it is a principle, and as such it requires that the eu financial stability framework that it has delivered so far evolves in tandem with financial innovation. but proximity of supervision is also reflecting the fragmentation of the banking landscape with more than 7. 000 banks and only 40 large cross border banks. the eu financial stability framework should ideally deal with the full spectrum of risks, including cross - border risks, at a minimum