to operate counter - cyclically without threatening market access. the second possibility is some form of deeper fiscal union at the euro area level. economic union clearly, the political economy of deeper fiscal integration is difficult, especially given the preferences expressed at the recent european parliament elections in some reform - resistant countries. thus, we should focus our efforts for now on making the new equilibrium work. but here again we need consistency. if the current fiscal rules are to be credible, we need higher growth, and that means looking deeply at how we coordinate structural policies across europe. on our current reform - resistant course, i see a distant but distinct probability that growth in the euro area begins a secular downward drift. with inflexible markets, downswings are likely to deeper, as adjustment has to happen slowly through quantities – i. e. unemployment – rather than quickly prices. and with low productivity and investment, upswings might be shallower as growth is driven only by cyclical rather than structural factors. indeed, most estimates find that potential growth in the euro area has diminished during the crisis. this is why moving ahead with structural reform is essential. the best way to raise real growth in the euro area is to open up product and services markets and to reallocate resources to the most productive industries. when i see that most countries in the euro area bis central bankers ’ speeches periphery have a revealed comparative advantage in services, 7 and yet these markets are the least integrated in europe, it strikes me as a missed opportunity. implementing structural reforms is of course mainly a national responsibility. but so far we have not done enough at the european level to help gather momentum behind them. some might argue that the european elections will make this harder still, but i would tend to disagree. first, the reasons for extremism in some countries have more to do with national governments than with europe. second, what is causing some people to turn against the eu, in my view, is not a dislike of european governance per se ; it is a lack of delivery on jobs and growth. if european policy - makers can find better ways to get the most out the european project, i strongly doubt the voters as a whole would be against that. 4. conclusion let me conclude. what i have tried to underline today is that a well - functioning market depends on getting the rules, institutions and instruments that govern it right. and the source of the euro area ’ s difficulties, in my view, is that policy -

of course the debate was about the law of god taking precedence over the law of kings. but fittingly, his motto was “ ich dien ” – german for “ i serve ”. and indeed, this notion of money as “ public service ” was exported and lived on : the same phrase appeared on british two pence coins until 2008. thus, there is a long intellectual tradition linking rule of law and sound money to functioning of free markets. but this connection found perhaps its clearest expression in the ordoliberal school that developed in germany in the 1930s. conceived at the university of freiburg by walter eucken and franz boehm, the central understanding of ordoliberalism was that a stable and well - functioning market economy required a strong legal and institutional “ moneta debt esse quasi quaedam lex et quaedam ordinacio firma ”. nicolas oresme, traite de la premiere invention des monnaies ( ca. 1355 ). bis central bankers ’ speeches framework. pure laissez - faire capitalism was unstable and liable to capture by monopolies. collectivist central planning, on the other hand, led towards waste and totalitarianism. thus, as the ordoliberals saw it, the role of government was to frame markets in such a way that actual outcomes would approximate the theoretical outcome in a perfectly competitive market. achieving such outcomes could imply de - regulation, if government was interfering too much in market processes, or re - regulation, if market failures were apparent – a feature that distinguished it from a laissez - faire approach. in other words, the role of government was both to untie the “ invisible hand ”, and to keep it firmly cuffed to the rule of law. at the same time, ordoliberalism recognised the crucial importance of monetary and economic stability to a well - functioning market. this implied an economic framework built around price stability, competition regulation and budgetary discipline – in eucken ’ s words, the perfect “ economic constitution ”. 2 this thinking had a strong influence on the design of the post - war social market economy in germany, and is seen by some as the foundation for german economic success in that period. interestingly, as many developing countries transitioned from planned to market economies in the 1980s and 1990s, there was something of a large - scale social experiment of the ordoliberals ’ views outside of germany. several transition economies followed the macro