because the euro area is a union of nation - states with strong national traditions and preferences. while there was sufficient consensus to share a currency, economic and financial policies remained organised largely at the national level. the global crisis has revealed the vulnerabilities in this arrangement. loose coordination of policies neither ensures stability nor does it facilitate effective crisis management. the institutional design of the euro area therefore has to be reviewed to put our economic and monetary union ( emu ) on a more secure footing. bis central bankers ’ speeches but how should this be done? there are two possible paths. the first is to go “ back to the past ”, to make the original design work better. the second is to develop a new architecture that properly reflects lessons of the crisis. in my view, the first path is not viable. we have seen that the euro area is too interconnected for economic and financial policies to be a purely national responsibility. we must find ways to guarantee that national decisions do not harm other members of the monetary union. in the event of a crisis, there should be effective mechanisms for crisis management. and where necessary, this means going beyond coordination, because this is a matter of europaische innenpolitik. we have also seen that maintaining stability requires common institutions that can react to events. the euro is the world ’ s second most important currency. it makes up 25 % of the world ’ s foreign exchange reserves. 1. 5 trillion euros are traded daily on the world ’ s foreign exchange markets. and it is used daily by the 330 million citizens of the euro area. a currency that plays a central role in the lives of so many people has to be managed with effective decision - making. the second path, designing a new architecture, is therefore the only way forward. the key challenge today is to present a vision to europe ’ s citizens of what this would entail – which is precisely the theme of this conference. together with the presidents of the european council, the european commission and the eurogroup, i have been given the task of working on such a vision for the next decade. we have aimed to be as pragmatic as possible : to establish what are the minimum requirements to make the euro function to its full potential. and our conclusions are both realistic and attainable. member states will have to pool more sovereignty in selected policy areas. this is a clear lesson of the crisis. but we will not need to cede all powers to brussels. sovereignty will only

extreme swing in the economic cycle. the real fed funds rate was kept negative for a span of nearly three years, from november 1974 to september 1977. the low interest rate environment led initially to a drop in the unemployment rate. but rising inflation and asset bubbles eventually dictated a restrictive monetary policy implemented by fed chairman paul volcker and his fomc colleagues. in the end, the nation paid a high price for the low rates of the 1970s, when unemployment reached 10. 8 percent in the recession of the early 1980s. in the drive to achieve price stability and stable growth, monetary policy is a powerful tool. certainly lowering interest rates is the appropriate monetary policy response to the onset of an economic recession and rising unemployment. but it is also a blunt instrument that has a wide set of intended but also unintended consequences that can and have worsened economic outcomes including misallocation of precious resources, inflation and long - term unemployment. that is why we want to return to a sustainable long - term equilibrium policy rate, starting soon. the economy is improving and policy should reflect that fact, carefully but confidently. although we find ourselves in a unique environment, history offers us some important lessons. if we do not learn from past mistakes, we will find ourselves repeating them yet again.