luis de guindos : building a resilient economic and monetary union lectio magistralis by mr luis de guindos, vice - president of the european central bank, opening the xxix edition of the masters programme in european union law of the university carlos iii of madrid, madrid, 5 october 2018. * * * the crisis, its aftermath and the road to recovery this autumn marks ten years since the start of the global financial crisis. it was a seismic event that laid bare a number of weaknesses in the international financial system – and in the oversight of that system. in its wake, it also revealed profound shortcomings in the architecture of economic and monetary union ( emu ) which, ultimately, resulted in the global financial crisis morphing into a euro area crisis – and pushing many parts of europe into a second recession. thankfully, the experiences of the past decade have prompted a strengthening of the regulations and the establishment of institutions with the necessary instruments to ensure stability. at global level this took the form of stronger regulation and cross - border cooperation. at european level, it meant a multi - dimensional reform of emu : financial, fiscal, economic and even political. as a result, and supported by the ecb ’ s monetary policy, the euro area returned to growth in 2013, and has created more than nine million jobs since then. we have come a long way. but there can be little doubt that we are still feeling the effects of the crisis and are still addressing some of the underlying fault lines. it ’ s an important task, but it seems that it is no longer being pursued with the same sense of urgency. that is why, today, i want to take this opportunity to highlight areas where we need to continue to push forward and put emu on a more sustainable footing. after briefly reviewing the progress already made, i will argue that the current debate on deepening our monetary union requires three main elements to ensure the long - term viability of the european project. first, we need to remain ambitious in completing the banking union so as to safeguard financial stability. second, we need to revamp our fiscal rules and create a stabilisation instrument to enhance the resilience of the monetary union as a whole. third, we need to bolster long - term economic growth by implementing structural reforms and harnessing the potential of europe ’ s single market. responding to, and learning from, the crisis in order to get a clearer idea of the

provide unlimited liquidity to financial institutions at a fixed interest rate against an expanded list of collateral. are these measures sufficient? or are additional measures necessary to secure price stability and preserve financial stability under the current circumstances? let me make three pertinent points : • first, the purpose of such measures is to improve the functioning of markets and the transmission of monetary policy when these are impaired by exceptionally high uncertainty and elevated risk perception. 4 clearly, the dysfunctioning of markets because of increased uncertainty and risk cannot be addressed by a change in the stance of monetary policy. • second, any measures that may be deemed appropriate to improve the functioning of markets and help stabilise the financial system may be taken independently of the level of policy rates. this is what the ecb has done in the past when it took “ nonstandard ” measures. put differently, i do not see a dependence, or necessary sequence, between the level or path of policy rates and the possible adoption of “ non - standard ” measures aimed at improving the functioning of markets and preserving the stability of the banking system. indeed, a possible implementation of such measures can be seen as an application of the “ separation principle ” i previously mentioned between interest rate decisions and other central bank operations. • third, as always, we will do whatever we judge to be necessary and appropriate to maintain price stability and contribute to the preservation of financial stability. other policies to tackle the crisis having said that, it should also be clear that we cannot rely solely on central bank policies to address all the consequences of the financial crisis and its fall - out on the economy. other policies and measures are required to tackle the challenges we are facing in the financial sector, in the real economy and in the complex interaction between the two. after all, hillary and tenzing also did not conquer the world ’ s highest mountain by themselves ; they were helped by a large team that was part of their expedition. in fact, as they were ascending towards the summit, they reached levels of altitude where further safe progress was possible only with the support of additional oxygen equipment. i am stretching the metaphor here, but dealing with the problems faced by some banks, and facilitating the provision of credit to the economy, may require the supply of “ additional oxygen ” in the form of government measures aimed at strengthening the banks ’ balance sheets, both on the liability and the asset sides. since last autumn, governments have provided, or pledged, a substantial amount in guarantees for new debt issuance by