16. 09. 2019 the emu at 20 : from divergence to resilience welcome address. third annual research conference of the banco de espana pablo hernandez de cos governor ladies and gentlemen, let me start by welcoming you to the banco de espana for the third annual research conference. we began organising this conference three years ago, with the aim of bringing together leading scholars and policymakers to discuss frontier research on relevant topics. this year, the chosen topic is “ the emu at 20 : current status and the way forward ”, which i think ranks highly in the current policy debate. it would be hard to imagine a more eminent group of researchers to discuss this topic. i would like to thank all of you for your attendance here today. 2019 marks the 20th anniversary of the creation of the euro. we reach this milestone in the context of a global macroeconomic deterioration, while still facing the legacy of the crisis, in terms of high unemployment rates and persistent levels of indebtedness. part of this worsening of economic conditions is linked to trade tensions, against a background in which the multilateral financial and trade system in place since the end of the second world war is being put into question. at the same time we are confronted with global trends, such as digitalisation and climate change, which pose significant challenges, of a different nature, for the european economy. but i am optimistic about our common future. economic and monetary union ( emu ) remains the world ’ s foremost economic integration project of recent times. and after 20 years, there can be no question that the euro is perceived by the public as a success. in the latest eurobarometer surveys, euro area citizens have declared the highest level of support for the euro yet recorded. europe has proved itself to be innovative and decisive, although sometimes the necessary steps have only been taken under the pressure of extreme circumstances, such as the ones we experienced during the last sovereign debt crisis. that said, some bold advances have been made towards the completion of emu over the past decade. let me highlight two of these. first, the two main pillars of the banking union that are now in place and operational : the single supervisory mechanism and the single resolution mechanism. second, the creation of the european stability mechanism, which played a significant role in the solution of the crisis, and the ongoing reform of which is expected to strengthen this institution ’ s capacity not only to combat but also to prevent crises. it is further envisaged that

##lmeyer ( 2018 ), “ the search for a euro area safe asset ”, peterson institute for international economics working paper, 18 - 3. brunnermeier et al. ( 2017 ), esbies : safety in the tranches, and esrb ( 2018 ). zettelmeyer and leandro ( 2019 ), “ beyond esbies : safety without tranching ”, in risk sharing plus market discipline. a new paradigm for euro area reform. 7 / 8 safe source of financing would be tailor - made for them. it could also provide some stabilisation for the economy, as investment provides a safety net in times of economic distress. in short, some sort of european investment agency, whether in the form of a new or an existing euro area body, with the capacity to issue bonds, might be able to target an optimal fiscal policy stance, while providing the economy with more safe assets, thus facilitating monetary policy transmission, increasing the international role of the euro and completing the banking and capital markets union. twenty years ago, the euro was seen, in christian noyer ’ s words, as a catalyst for integration. this view is now as valid as it was then. in order to achieve price stability, the single currency generates the need to pursue sound economic policies. but it is clear now that monetary integration does not immediately lead to financial integration. this is an ongoing process, and the governance framework to guarantee the success of the european project is still developing. we must endeavour to achieve completion of the capital markets union and the banking union. this will also require progress towards the fiscal union. a european safe asset lies at the heart of all of these initiatives. but, more often than not, the heart is the most difficult place to reach. i am sure that these two days will bring advanced research and a constructive exchange of views to bear on this and other important areas of the euro area architecture. thank you for your attention. 8 / 8