increases, because nothing converts cyclical unemployment to structural unemployment more efficiently than prolonged spells of unemployment. the relocation of the unemployed youth to new jobs is a pressing issue the relocation of the unemployed youth to new jobs is a pressing issue, as prolonged unemployment at the start of the working career has substantial long term costs for both individuals and society as a whole. labour market institutions and policies should take this challenge seriously. labour market institutions in many european countries are slowing down the process of economic restructuring in their present form, the labour market institutions in many european countries are slowing down the process of economic restructuring and hampering the pace of employee allocation between sectors. high and persistent unemployment makes fiscal consolidation more challenging, and hampers the monetary transmission mechanism. labour market institutions and reforms should avoid partiality labour market segmentation tends to amplify employment adjustment disproportionately for some groups, like young workers. therefore labour market institutions and reforms should avoid partiality, ie. large differentiation across worker groups. the focus should be on comprehensive reforms that lower average labour adjustment costs across the whole economy instead. reforms that promote restructuring and reduce segmentation will pay off in the future in terms of competitiveness, potential output, welfare and public finances the functioning of the labour market will be an important determinant for the speed or the recovery of european economies. reforms that promote restructuring and reduce segmentation will pay off in the future in terms of competitiveness, potential output, welfare and public finances. thank you for your attention. see e. g. blanchard & wolfers ( 2000 ) and ljungqvist & sargent ( 1998 ). bis central bankers ’ speeches references bentolila, samuel, juan jose dolado and juan f. jimeno. 2011. “ reforming an insideroutsider labor market : the spanish experience ”, iza discussion papers 6186. blanchard, olivier and justin wolfers. 2000. “ the role of shocks and institutions in the rise of european unemployment : the aggregate evidence ”. the economic journal, vol. 110, no. 462, c1 – c33. bonthuis, boele, valerie jarvis and juuso vanhala. 2012. “ what ’ s going on behind the euro area beveridge curve? ” mimeo. available at http : / / www. suomenpankki. fi / en / suomen _ pankki / organisaatio / asiantuntijoita / pages / vanhala _ juuso.

##f working paper 12 / 238. cf. richardson ( 2012 ), “ why the volcker rule is a useful tool for managing systemic risk? ” a white paper. new york university stern school of business. bis central bankers ’ speeches note that capital requirements also help maintain liquidity in the markets : when banks have higher capital buffers to absorb losses, there will be less need for fire sales of assets. fire sales seriously undermined market liquidity during the crisis. second, new recovery and resolution tools have been constructed. the key instrument is to make it possible to bail - in bank debt in a crisis, in order to avoid bail - outs with taxpayer money. moreover, the resolution authority is given great powers to restructure a bank when the point of likely to fail has been reached. this will be a key in restoring private market discipline on banks, and thus to reduce the too - big - to - fail problem. the importance of implementing the bank recovery and resolution directive, upon which political agreement was achieved in the summer, cannot be overstated. in europe bank resolution ( single resolution mechanism, srm ) is part of the larger aim of forming a true banking union. the establishment of the srm will facilitate the resolution of cross - border banks. the other element of the banking union is the single supervisory mechanism in connection with the ecb. the banking union project also includes a third element ; the prospect of creating a common deposit insurance system. however, the first priority ought to be to harmonize the national systems, which currently vary greatly. there are also a number of regulatory initiatives that intend to increase transparency in the financial markets. for example, accounting standards and disclosure practices are reviewed, and banks are urged to improve risk management and corporate governance practices. supervision and regulation of derivatives markets and the shadow banking system are revised, including moves to central counterparties which will help address the contagion risks embedded in long counterparty chains in the otc markets. [ slide 13 – authorities should foster the stability of the entire financial system ] macroprudential analysis and tools are being developed mainly on the national basis, but also in accordance with basel iii ( and its application in europe ; the capital requirement directive ) for the purpose of setting counter - cyclical capital buffers. moreover, the european systemic risk board has published guidelines on the implementation of macroprudential tools across the eu member states. this is a highly important but challenging area of work where we will see a lot