that we at the ecb have recently called for stronger common governance in this area. this call reflects the fact that some of the original expectations on how monetary union would function have, i think, now clearly been shown as over - optimistic. in particular, when the maastricht treaty was signed, it was evident to most policymakers that monetary union would ultimately need to be accompanied by integration in other policy areas too. but it was widely expected that, following the functionalist logic, sharing a single currency would automatically trigger that integration. we know this did not happen. and while the role of common institutions, rules and procedures has increased, the institutional equilibrium in the euro area is still fragile. institutional responses to our economic challenges so my third point is that we need to reflect seriously on the key features of a well - functioning monetary union, and how we can progress towards establishing them. a lot of progress has already been made in strengthening our rules and institutional architecture. we have reinforced our fiscal rules and improved the coordination of our economic policies. and we have made a huge institutional leap with banking union, establishing the single supervisory mechanism ( ssm ) within the ecb and a single resolution mechanism ( srm ). but we know that the architecture of emu is not yet complete, and the 5 presidents ’ report published this monday describes how to take this process to the next level. though like rome a complete emu cannot be built in a day, i believe we have to be ambitious both in the short and longer term. we have to show that we are building a bridge towards a more stable and prosperous union. this is what the report does. it fleshes out a number of quick - wins that can be implemented in a first stage without treaty change. the commission will come forward with concrete proposals on these still this year. and it sets the priorities for more fundamental changes to how monetary union operates in the future. the ecb fully supports this process and will continue to actively contribute to it. let me highlight what we see as two crucial aspects of the report. first, the report makes a strong case for completing banking union. it calls for finding a swift agreement on bridge financing and a permanent backstop for the single resolution mechanism ( srf ), with the esm identified as the natural institution to act as a backstop for the srf, while remaining fiscally neutral. these measures would help further sever the banksovereign nexus, which would in turn complement the

european economy, belonging to the euro area is a " win - win " situation : not only in terms of achieving the concept of the internal market and enjoying the lowest interest rates because all risk premia by comparison with the best - performing currencies are eliminated, which is of particular benefit for those countries which had high market interest rates ; but also because all risks associated with exchange rates are eliminated within one vast integrated economy, which is good for all countries, including those whose market rates were already low. turning to the fifth idea, on the question of whether we can contribute further to growth and job creation while fulfilling the requirements of our mandate, some say : “ you should be less demanding in your definition of price stability. 2 % is too low. make it 3 %. you could then reduce your intervention rates! ” but such advice would backfire : by opting for 3 % we would not only lose the confidence of households but also push all rates up, not down, with those rates incorporating the increase of 1 % in expectations of future inflation. and that would be totally counterproductive … others make a more admissible remark and say : “ your definition of price stability is in line with a good anchoring of inflation expectations. this is good for growth. but are you not doing too much? perhaps you could achieve the same result with lower intervention rates! ” yet this is not what the information we currently have available suggests : if we had been too cautious not only would our fellow citizens share that view ( and then they would find the price rises reasonable ) but also this would have had an impact on the observed price rises ( which would then be significantly lower than our definition of price stability ) and above all on inflation expectations, which would then be significantly less than 2 %. this is not the case at present. regarding inflation expectations in particular, all of the public and private surveys and market indicators converge to 1. 9 % or 2 %. we cannot be arithmetically closer to 2 %! these objective surveys show that we are doing what it necessary to ensure stability and credibility, no less … no more. and that is why the governing council considers our interest rates to be appropriate. we are not biased – i have said that i was not preparing the markets for a rate cut. nor am i preparing them for a rise in interest rates. we remain vigilant, realistic and pragmatic. * * * a good monetary policy is necessary but not sufficient alone – it