single supervisory mechanism for systemically important banks as well as a single resolution mechanism will be an important step forward. in this regard, a common resolution regime will have to ensure that banks without a viable business model can exit the market in an orderly fashion. such a regime is crucial not only for financial stability, but for sustainable growth as well. a functioning resolution regime strengthens incentives for effective credit monitoring and moderates banks ’ risk appetites. in so doing, it enhances the allocation of capital and reduces the risk of a bubble emerging. better still would be if banks didn ’ t reach the point of having to be wound down in the first place. in this regard, higher capital requirements are a big part of the solution – the single supervisory mechanism is another. the role of monetary policy these are necessary steps that will put the euro area back on the path to prosperity. finally, please allow me to make a few short remarks on the role of monetary policy during the crisis. monetary policy has already done a lot to absorb the economic consequences of the crisis, but it cannot solve the crisis. this is the consensus of the governing council. the crisis has laid bare structural shortcomings. as such they require structural solutions. “ structural reforms may hurt a few vested interests, but they would clearly strengthen the effectiveness, competitiveness and, yes, also the fairness of our economies. ” those are mario draghi ’ s words, not mine. i agree, however. the best contribution a central bank can make to a lasting resolution of the crisis is to fulfil its mandate : that of maintaining price stability. and this is what jacques rueff actually meant when he made that famous statement in 1949. as david marsh has pointed out, it was a declaration of support for common principles of monetary stability rather than an early advocacy of a single currency. we should not jeopardise now what we have fought so long to achieve. conclusion ladies and gentlemen, let me conclude. monetary union has always been both a political project and a prosperity promise. to fully unleash the common currency ’ s potential, efforts are needed on two fronts : structural reforms as well as the abolition of implicit guarantees for banks and sovereigns. but i did not come here to preach ; i came here to discuss, to listen, and to learn. so without further ado, i would like to hand over to our moderator, nicolas beytout. bis central bankers ’ speeches

promised to foster prosperity as well. hopes were high that the euro would set in motion a process of real convergence. it was expected that governments would have no choice but to implement structural reforms and improve their supply side, since stimulating demand would no longer be an option. fiscal policy was supposed to be bound by the rules of the stability and growth pact and by the disciplining effect of the financial markets ; monetary policy, meanwhile, would no longer be available to national policymakers at all. we now know that things did not quite work out as expected. that poses a fundamental question : do we need to shift economic policies to the european level to make monetary union viable? or will it suffice to amend the existing framework? in my remarks, i wish to argue that both avenues can in principle lead to a stable framework. the changes required to amend the current framework are by no means trivial. but it is my impression that, at the current juncture, they might be more feasible than giving up national sovereignty in fiscal and economic matters. bis central bankers ’ speeches a stable framework for a prosperous monetary union the crisis can be read simultaneously as a sovereign debt crisis, a balance of payments crisis and a financial crisis. but in my view, there is one basic economic principle which goes a long way towards explaining it : people respond to incentives. and in the case of europe, implicit guarantees for banks and sovereigns caused shareholders, investors, governments and voters to ignore, or worry less about risk. underestimated contagion effects between countries exacerbated these effects. in the end, the balance between liability and control – which is essential for any market economy – had got out of kilter. this, for me, largely explains the unsustainable developments in the run - up to the crisis. and this is what needs to be changed for the euro area to regain its footing. in terms of the implicit guarantee given for sovereigns, a genuine fiscal union would be a path towards establishing a framework which balances liability and control. in this scenario, control and intervention rights would be shifted to the european level. if this prerequisite were fulfilled, a greater mutualisation of liabilities would become feasible – and may be justified. but it seems to me that giving up national sovereignty in fiscal matters does not enjoy a majority in europe at this juncture – neither among politicians nor among the general public in the member states. president hollande ’ s recent response to the european commission