olli rehn : next steps towards a stronger monetary union speech by mr olli rehn, governor of the bank of finland, in the inter - parliamentary conference on “ stability, economic coordination and governance in the eu ”, session “ economic governance in the emu : what next? ”, helsinki, 30 september 2019. * * * accompanying slides of the speech. rt. hon. members of parliament, ladies and gentlemen, it is a great pleasure to discuss these most relevant topics of emu reform with a most knowledgeable audience, among old and new friends. since 2013, economic growth has continued in the euro area, and the unemployment rate has been on a downward trend. this is most welcome. however, we have major challenges of the short term and longer term now. the first ones relate to the current economic downturn, the latter to the unfinished business of the economic and monetary union. let me discuss these challenges one after another. 1. for some time by now, the world economy has been going through a downswing led by the deceleration in world trade and industrial production. that ’ s why the governing council of the european central bank decided two weeks ago on a monetary policy package that consists of mutually reinforcing elements. it aims to ensure that financial conditions remain favourable to firms and households, so that they support sustained growth and the sustained convergence of inflation to our medium - term inflation aim. however, as rightly pointed out by president mario draghi, these substantial monetary policy measures are leveraged best when also the other economic policy areas support euro area growth. monetary policy cannot be the only active player in the field. in recent years, especially as the low interest rate environment and the effective lower bound have been constraining monetary policy, more and more attention has been put on fiscal policy and its capacity to help revitalise the economies that are suffering from subdued growth that is clearly below potential. it is evident that the role of fiscal policy is stronger when the effective lower bound is binding. this calls for a better balanced policy mix in the eurozone than is the case today. policy mix does matter for both the short - term and longer - term. even though cyclical fluctuations refer to temporary movements, their effects may persist for a long time. for instance, a cyclical rise in unemployment may have long - lasting effects, especially if the labour market institutions do not support the unemployed in regaining work. while an effective, coordinated use of fiscal and monetary

resolution mechanism. as you know, intensive talks in the form of eu trilogue are currently going on the issue. in addition, deposit insurance schemes will be strengthened and harmonised as part of the banking union in the long run. the banking union may also be complemented by structural reforms. the european commission has made a legislative proposal based on the liikanen report and the european parliament will handle it in the future. bis central bankers ’ speeches in the future, the banking union, when properly implemented, will help us resolve banking problems while avoiding using taxpayers ’ money for bail - outs. this in turn means also better incentives in banking and hence a more stable financial system. preparations for single supervisory mechanism let me now share with you some recent developments in the single supervisory mechanism ( ssm ). the eu regulation assigning supervisory tasks to the ecb became effective in early november 2013. already well ahead of this time, the ecb and national supervisors started practical preparations to ensure timely adoption of supervisory responsibilities by the ssm. thus we have got a “ flying start ” for the whole project. as a concrete step, the ecb governing council nominated ms daniele nouy for chair of the supervisory board of the new single supervisory mechanism. the heads of directorates, four director generals have been appointed as well. a broader recruitment process of supervisors is under way. the supervisory board had its historical first meeting last week, accepting and confirming a lot of issues prepared by the high - level group. now there is an on - going transition period, during which a comprehensive assessment of significant banks is carried out. during the same period other preparations for the ssm are to be completed. comprehensive assessment the comprehensive assessment of european banks is an essential element of the preparations for the ssm. it should be noted that the ssm regulation also enables the ecb not only to obtain all the relevant information from the national authorities necessary for making the assessment but also to take over direct supervision of any credit institution it wants. this is important to guarantee consistent application of high supervisory standards. the comprehensive assessment has three main goals. first of all, the assessment aims at transparency through enhancing the quality of information available on the condition of banks. its second goal is to repair banks ’ condition by identifying and having the necessary corrective actions implemented where necessary. finally, the comprehensive assessment builds confidence by assuring all relevant stakeholders that banks are fundamentally sound and trustworthy. the ecb will conduct the comprehensive assessment in close cooperation with national