mechanisms that operate through changes of competitiveness and the effect of budget constraints monitored by the financial sector. naturally, countries must adopt policies that reinforce those spontaneous processes of adjustment by trying to prevent more serious problems to start with. as i wrote in 2000 : “ it can be said that the macroeconomics of a successful monetary integration is about the interiorization by economic agents of new rules regarding fiscal policy and wage behaviour. fiscal policy needs to keep a countercyclical role to act as a shock absorber. wage behaviour should take as a reference wage cost developments in the euro area as a whole and should deviate from those only if there is a productivity growth differential. ” in reference to portugal, our policies did not always follow these principles. but independently of it, the initial shock of interest rate reduction after joining the euro coming from a previous regime of higher rates, implied an unavoidable explosion of private expenditure and debt that no sensible fiscal policy could completely offset. as i remarked in 2004, the initial boom of private expenditure was as unavoidable as the subsequent fall and adjustment. after a mild recession in 2003 and a big budget slippage in 2005, we implemented what has been so far the biggest fiscal correction since the inception of the euro and initiated a broad process of adjustment. in mid 2007, we had achieved a budget deficit below 3 % in a consistent way, the economy was growing again at around 2 % and our inflation rate was below the euro area average. our relative unit labour costs against our main trading partners ( 21 countries ) increased from 2003 to 2009 by just 4. 4 % which is well below the increase of 10. 9 % for the euro area average, using the same concept of the real effective exchange rate. since 1999 the figures are 9. 1 % for portugal and 15. 9 % for the average of the euro area. on a par with this, our inflation rate since mid 2007 has been below the figure for the euro area. our economy has been in a mode of competitive disinflation throughout this period. at the same time our productive structure continued to progress in the value chain and by 2008, for instance, our exports of services to business already had a higher weight than the traditional exports of textiles and clothing. unfortunately, the improvement in our balance of goods and services was not sufficient, as our savings rate continued to be very low and our energy bill and the outflows of the income balance combined to keep a very high external deficit

elisa ferreira : from repair to vision - conceptions for a common beneficial and resilient financial architecture and institutional framework in the eu address by ms elisa ferreira, vice - governor of the bank of portugal, on the panel " from repair to vision : conceptions for a common beneficial and resilient financial architecture and institutional framework in the eu " at the " financial stability conference 2018 ", lisbon, 31 october 2018. * * * the setting up of the single rulebook in the european union ( eu ) and the launch of the banking union ( bu ) with its rules and institutions constitute a commendable success of the post - crisis financial sector reforms in europe ; however the lack of political will to complete the architecture seriously jeopardises its key benefits. recent cases highlighted what i would call an ‘ accountability conundrum ’. banks nowadays are mostly ‘ european in life but remain national in death ’. this means that, while supervisory and resolution decisions are mostly taken at european level, the ensuing consequences still lie with taxpayers at national level, with potential serious impacts on national budgets. as the ultimate guarantor of financial stability remains national, but with limited tools to act, this ‘ accountability conundrum ’ needs to be solved. this unstable balance that emerged in the eu prevents economic agents from fully reaping the expected benefits of economic integration. europe needs concrete plans going forward, and must address pressing questions on what is still missing to safeguard financial stability. absent a fully - fledged european deposit insurance scheme ( edis ) in the short to medium term, a plan is urgently needed for the interim period ( until the bu can be completed ). among the possible topics for debate, i would suggest : 1. first, the development of a specific institutional regime to address member states ’ concerns over the risks of potential failures of cross - border banking groups : host member states within the bu need tools to address financial stability risks arising from locally systemic undertakings ; the absence of such instruments currently hinders progress on issues such as : ( i ) the adoption of waivers on liquidity and capital, and ( ii ) the removal of options and national discretions ( onds ) which are in close connection, among others, with : the rethinking of the single point of entry ( spe ) / multiple point of entry ( mpe ) resolution models ; in particular, the generalisation of the spe model within the bu requires that both the concerns at group level ( home ) and