distance to the zero lower bound. but while raising growth potential in germany and the other member states will do much to strengthen the euro area, it is not the end - all to making the monetary union more resilient. when it comes to resilience, one has to talk about risk sharing. how can shocks that hit individual member states particularly hard be cushioned? in the united states and other large currency areas, shocks are spread through the distribution of business profits and losses throughout the currency area, because company owners are often resident in other states. another channel of private economic risk sharing comes through saving and lending. enterprises and households take out loans in different us states during an economic downturn to bridge a slump in earnings. risk sharing through fiscal policy takes a back seat by comparison. only 10 % to 25 % percent of all risks are shared by a common fiscal policy in federations like the us orcanada. 3 clearly, much could be achieved in the euro area by strengthening cross - border corporate equity funding. to tear down the walls in european capital markets by standardising national insolvency regimes is, in my view, just one particularly important step. investors need to be able to count on a level playing - field existing throughout europe. not only will that promote private risk sharing ; it will also reduce capital flows to less productive businesses and stimulate flows to more productive ones. that will boost economic momentum, as oecd research confirms. 4 additionally, as christine lagarde has pointed out, " there is an inherent debt bias embedded in the global tax system ". the development of equity markets, including in europe, is suffering from the preferential tax treatment given to debt over equity capital. 5 interest payments can be deducted from taxable income ; equity costs cannot. eliminating this bias, which i admit would not be trivial in political terms, would encourage businesses to make greater use of equity capital as a funding instrument. and that, in turn, would facilitate greater private risk sharing whilst at the same time reducing the debt bias. another way in which risk could potentially be shared might be for enterprises and households to take out cross - border loans in times of crisis. yet this mechanism hardly worked at all during the crisis in the euro area. one of the steps taken in europe to prevent the repetition of a financial crisis was to create the banking union. with its single supervisory mechanism and rules on bailing - in creditors in the event of bank failures, the banking union bo

( csef ), university of naples, italy. roland de bruijn, henk kox, arjan lejour ( 2008 ), “ economic benefits of an integrated 9 european market for services ", journal of policy modeling 30, pp 301 – 19. 10 copenhagen economics ( 2010 ), the economic impact of a european digital single market, final report. 11 muge adalet mcgowan and dan andrews ( 2005 ), “ insolvency regimes and productivity growth : a framework for analysis ", oecd working paper ( 2016 ) 33. 12 see, for instance, r martin, t munyan, b a wilson ( 2015 ). potential output and recessions : are we fooling ourselves? board of governors of the federal reserve system international finance discussion papers number 1145. 13 hoffmann, m and sorensen, b ( 2012 ), don ’ t expect too much from ez fiscal union – and complete the unfinished integration of european capital markets, voxeu, 9 november 2012. 6 / 6 bis central bankers'speeches