necessary reforms to ensure structural convergence, so that complying with those rules becomes easier, and sharing risks does not create permanent transfers between countries. compliance and convergence, and through it growth, are the keys today to give to the integration process new impetus. and that impetus we must find, because we cannot stay where we are. we have to make our union more stable and prosperous to deliver the security our citizens crave. and by doing so we will put ourselves in a stronger position to confront the new challenges we face today : the rise of political extremism, insecurity on our borders and an ever more uncertain global order. so we must rediscover the spirit that has carried our union this far. the spirit that has led generations of europeans to work together to secure themselves against common threats. that has yielded tangible improvements for our citizens, such as the freedom to work and trade across our continent and transact in a single currency. and the spirit that, if channelled once more into common action, can overcome the new threats we face today. unity is the key to security for our continent – today as it always has been. 1 standard eurobarometer 86, autumn 2016. 2 badinger, h., “ growth effects of economic integration : evidence from the eu member states ”, review of world economics, vol. 141, no 1, pp. 50 – 78, 2005. 3 campos, n., coricelli, f. and moretti, l., “ economic growth and political integration : synthetic counterfactuals evidence from europe ”, iza discussion paper, no 8162, april 2014. 4 lejour a. m., solanic v., tang p. j. g., “ eu accession and income growth : an empirical approach ”, transition studies review, vol. 16, issue 1, pp 127 – 144, may 2009. 5 mundell, r., “ optimum currency areas ”, luncheon speech at tel aviv university, 5 december 1997. 6 / 6 bis central bankers'speeches

from the single market to the euro but the single market also had a further effect : it led directly to the euro. once europe decided to embark towards a fully integrated market, a single currency was desirable, if not essential. hence the euro was set in motion at the hanover summit in 1988, immediately in the wake of the decision to achieve a true single market. today some people question this link between market and currency, and ask whether retaining national currencies might have been better for europe. but one has to remember that the single currency did not appear out of thin air. it was rather a consequence of europe ’ s long and unsatisfactory experience with different exchange rate regimes since the war. it was also, in other words, both an idealistic and a pragmatic decision. europeans had always been sceptical of fully floating exchange rates, seeing currency volatility as inimical to trade integration. that is why, as soon as the bretton woods system broke down, they sought to restore fixed exchange rates, first through “ the snake in the tunnel ”, and later through various iterations of the european monetary system. the prevailing thinking was wellcaptured by nobel laureate robert mundell, who developed his theory on optimum currency areas in the belief that, and i quote, 3 / 6 bis central bankers'speeches “ i could not see why countries that were in the process of forming a common market should saddle themselves with a new barrier to trade in the form of uncertainty about exchange rates. ” 5 hence, it was inevitable that the single market would be buttressed by some form of fixed exchange rate regime. the question was what form. and europe had experienced the costs of fixed exchange rate regimes that fell short of a single currency. countries were vulnerable to speculative attacks and currency crises, most painfully demonstrated by the erm crisis in 1992 – 3, and that was in a world where capital was less mobile than it is today. most members had little monetary policy autonomy, since they were required to effectively import the monetary policy of the anchor currency. and when countries did devalue, it did not always prove an effective adjustment mechanism for nominal shocks, provoking instead higher inflation and the need for further devaluations. moreover, the fear was that, without a single currency, repeated cycles of devaluations would distort the conditions for fair competition and undermine the single market in the long run. an economy that increased productivity and competitive