of these “ mega - trends ” is very substantial, although it is difficult to quantify them precisely. in my view, the euro area as a whole has exhibited resilience to such external developments. it is, as a whole, significantly more resilient than many of its individual member countries were before the launch of the euro. 3 the euro area has been a source of stability. in short, the current state of the euro area is one of increasing interdependence and ongoing integration. over these ten years, we have observed greater price stability, greater macroeconomic stability, as well as increasing economic and financial integration. however, despite these achievements, there is no room for complacency, and a great deal still needs to be accomplished. i now want to put forward the argument that several changes in this second decade and beyond will have to come from the “ e ” in emu : namely that there is a need for further substantial efforts and reforms on the economic side. in other words, i argue that there is a need for a sound economic management. this has two facets. the first is that the overall level of economic performance in the euro area needs to improve. think, for example, of the question as to how the euro area as a whole might raise its potential growth … and actually grow at such a higher level. the second facet is that we need to understand and address diversity of economic performance across the euro area. think, for example, of the question as to the extent to which euro area countries differ in terms of economic performance. i will deal with these aspects in turn. not so long ago, the impact of movements of the deutsche mark against the us dollar was often aggravated by similar movements between the currencies that have now been replaced by the euro. this can no longer happen. this increasing resilience is illustrated by the fact that the major shocks of the last ten years have not played an important role in the dispersion of output growth. in other words, they have not contributed to the economic diversity that i will now go on to discuss. 2. on the economic performance of the euro area the achievements i have just described have accompanied an impressive performance in terms of job creation. from the start of emu to the end of last year, as i have already mentioned, the number of people in employment in the euro area has increased by 15. 7 million, compared with an increase of only some 5 million in

higher expectations of lenders ’ underwriting standards for consumer credit, and recalibrated the leverage ratio. with detailed contingency planning for the financial stability impacts of brexit, uk companies can be confident of continued access to finance in an uncertain world. reforms mean the uk financial system is working well. net lending to private companies is been growing following six years of contraction. corporate bond spreads are well below their long - run averages ( chart 13 ). and credit conditions among smes have been steadily improving. if the opportunities present themselves, uk corporates could readily draw on this finance as their balance sheets are in good health following a decade of de - levering to ratios amongst the lowest in advanced economies. turning now to monetary policy, the bank operates within an established framework, anchored in the inflation target ( chart 14 ). the mpc set out in advance of the referendum how it would apply that framework, emphasising that the effects of the process of leaving the eu on inflation would depend on its impact on demand, supply and the exchange rate. the committee has repeatedly stressed that, as a result, the implications for monetary policy would not be automatic. the mpc has also clearly set out its reaction function consistent with its remit. under the exceptional circumstances brexit entails ( with an inflation overshoot driven entirely by an exchange rate depreciation caused a large fundamental shock ), the committee is required by its remit to balance a period of abovetarget inflation with a period of weaker growth. as the primary objective of monetary policy remains inflation control, any overshoot of inflation above the target can only be temporary in nature and limited in scope. as such, the mpc has been clear that its tolerance for above - target inflation is limited. since the prospect of brexit emerged, financial markets, notably sterling, have marked down the uk ’ s economic prospects. monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the eu. but it can influence how this hit to incomes is distributed between job losses and price rises. and it can support households and businesses as they adjust to such profound change. see the statistical annex to the bank for international settlements 87th annual report, ibid. all speeches are available online at www. bankofengland. co. uk / speeches as spare capacity erodes, the trade - off that the mpc must balance lessens, and, all else equal, its tolerance for