looking at the german government ’ s recent economic policy decisions, not all of them adequately address the needs resulting from these challenges nor do they set the kind of example which a large euro - area country like germany should be setting for the other member states. however, i do not want to talk about germany in too much detail today. rather, i would like to share my views on the future of european monetary union. from an economist ’ s point of view, the question whether a country should abandon its currency and join a monetary union is typically analysed in the framework of what is known as the theory of optimum currency areas. bis central bankers ’ speeches without a doubt, the euro area lacks some of the characteristics of an optimal currency area. labour mobility, for instance, is much lower than in the us ; plus the business cycles are not synchronised, nor is there any central fiscal stabiliser. at the end of the day, the decision to create european monetary union was a political one, not an economic one. nonetheless, in the first 15½ years since the euro was launched, people have enjoyed a stable currency. the average euro - area inflation rate has been 2. 0 %, which is very close to the ecb governing council ’ s definition of price stability ( “ below, but close to, 2 % ” ). however, the crisis exposed shortcomings on a national level and the fragilities of the institutional framework of the monetary union. but i am positive that if we learn from the sovereign debt crisis, the european economy will be stronger than before the crisis and we will be able to maintain our monetary union as a stability union – and it is indeed worth being maintained. in the next 30 or 40 minutes, i would like to discuss how we can achieve this end. i will start by looking into what still needs to be done at the national level. from there, i will go on to address the weaknesses in emu ’ s institutional foundation. moreover, i will touch upon current monetary policy issues. but before i talk about what needs to be done, let us take a step back and consider what went wrong in the first place. the origins of the crisis for many euro - area member states, the introduction of the euro ushered in a new era of abundant capital owing to the elimination of exchange rate risks. however, the favourable financing conditions in the euro - area countries which had previously higher interest rates mainly stimulated investment in real estate and

recently said in athens, there is still work to be done. continued structural reforms are needed to accelerate growth, create more jobs, and boost both productivity and wages – not just in greece but in other euro area countries, too. by the way, we in germany should not be content to merely ride the wave of the successful labour market and social reforms implemented in the 2000s. the institutional foundations of monetary union require further reform if the euro area is to be made permanently crisis - proof. because there ’ s one thing we can probably all agree on : none of us want a repeat of the last ten years of crisis. the extensive rescue packages put together in recent years have triggered debates in the countries providing assistance on the mutualisation of liability and intergovernmental transfers. in the countries receiving assistance, the conditions attached to the programmes were seen as very severe in some cases and as outside interference in national decision - making. 3 a strong europe : more important than ever the crisis in the euro area and the way in which it was resolved have also stirred up animosity and resentment and given a boost to anti - european movements. decidedly euro - critical and populist parties have enjoyed electoral success in many member states. but this development cannot be put down to rescue measures alone, as populist movements are flourishing outside the euro area, too. 2 / 10 bis central bankers'speeches looking at the economic setting, this discontent may come as a surprise, what with the global economy experiencing a robust upswing. in the united states, the united kingdom, germany and elsewhere, unemployment has fallen to its lowest level in decades. but it would seem that economic effects aren't the only significant factors at play here. digital change and globalisation, for example, are transforming the way we live and work. populist movements play on the fact that people perceive these profound changes as a threat. and i can understand that many people feel uneasy and cheated, and why they fear that they have lost control. " take back control " – that was the motto of brexit supporters. walter eucken once remarked, " people ’ s opinions, their mental attitudes, are often more important as regards the direction of economic policy than economic facts themselves. " 3 3. 1 globalisation and technological progress from an economic perspective, it is clear that technological progress and free trade boost general prosperity in the long term. however, looking at the bigger picture obscures the fact that employment prospects and relative wages are