to national decision - making, increased risk - sharing in the policy fields affected will undermine the stability foundations of the euro area. let me give you a specific example. as long as member states can have a major say on the quality of bank balance sheets, such as through national insolvency legislation, then a european deposit protection scheme would not only be premature but would also create incentives to shift risks to the banking system ; these would then have to be borne by all. a european deposit protection scheme, moreover, would be justifiable only if banks were less dependent on the solvency of their home countries. however, since the banks are currently holding large quantities of their own countries'sovereign bonds, a european deposit protection scheme would be tantamount to communitising sovereign debt. without the willingness to extensively relinquish sovereign rights, there is only one way to weatherproof the structure of the euro area : we need to reinforce individual national responsibility by making the " no bail - out " clause enshrined in the maastricht treaty more credible. after all, the only way this " no bail - out " clause can exert its disciplining effect is if financial market players also believe it to be in force. in order to lend credibility to the " no bail - out " rule, sovereign debt restructuring would need to be possible without jeopardising financial stability. as things now stand, were one euro - area member state to become insolvent, this would threaten the entire euro - area financial system owing to the close nexus between sovereigns and banks. member states, fearing contagion bis central bankers ’ speeches effects, were therefore willing to provide fiscal assistance to greece and other euro - area countries in crisis. but it's not just the recipient countries that benefit from the esm firewall, the private creditors are, too, as, thanks to the esm loans, they get back all the funds they lent to the crisis countries, for which they will, in most cases, have collected a sizeable risk premium. only in greece have private creditors taken a voluntary haircut, but that wasn't until 2012, two years after the first fiscal assistance was granted. this practice is not compatible with the liability principle propounded by walter eucken ( " those who enjoy the benefits must also bear the costs " ). against this background, the bundesbank presented a relatively simple proposal a number of years ago that is designed to

janet l yellen : semiannual monetary policy report to the congress testimony by ms janet l yellen, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 21 june 2016. * * * chairman shelby, ranking member brown, and other members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report to the congress. in my remarks today, i will briefly discuss the current economic situation and outlook before turning to monetary policy. current economic situation and outlook since my last appearance before this committee in february, the economy has made further progress toward the federal reserve ’ s objective of maximum employment. and while inflation has continued to run below our 2 percent objective, the federal open market committee ( fomc ) expects inflation to rise to that level over the medium term. however, the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate. in the labor market, the cumulative increase in jobs since its trough in early 2010 has now topped 14 million, while the unemployment rate has fallen more than 5 percentage points from its peak. in addition, as we detail in the monetary policy report, jobless rates have declined for all major demographic groups, including for african americans and hispanics. despite these declines, however, it is troubling that unemployment rates for these minority groups remain higher than for the nation overall, and that the annual income of the median african american household is still well below the median income of other u. s. households. during the first quarter of this year, job gains averaged 200, 000 per month, just a bit slower than last year ’ s pace. and while the unemployment rate held steady at 5 percent over this period, the labor force participation rate moved up noticeably. in april and may, however, the average pace of job gains slowed to only 80, 000 per month or about 100, 000 per month after adjustment for the effects of a strike. the unemployment rate fell to 4. 7 percent in may, but that decline mainly occurred because fewer people reported that they were actively seeking work. a broader measure of labor market slack that includes workers marginally attached to the workforce and those working part - time who would prefer full - time work was unchanged in may and remains above its level prior to the recession. of course, it is important not to overreact