if we want to be able to tackle the next crisis and have sufficient fiscal room for manoeuvre, strictly applying the rules of the stability and growth pact today is both logical and imperative. but on the other hand we have seen the political limits of the rules - based framework. every time the rules are set to bite, national interests prevail over those of the euro area. this is built into the framework : as long as economic and fiscal policies are in the end a matter of national competence and as long as commonly agreed rules are perceived as an intrusion into policies that are seen as genuinely national, the interests of the euro area as a whole will probably not be strong enough to carry the day unless a country is forced to enter a financial assistance programme. therefore, we will, in the end, have to accept certain economic and fiscal policies in the euro area as truly shared competences, as the internal market already is ; others, which are not essential for the smooth functioning of emu, should remain solely a national competence. hence, such a step should certainly not mean centralisation at european level for each and every policy. but it should mean that in those policy areas that are crucial for the functioning of emu common legislation and policies will be needed where appropriate and warranted to ensure the primacy of the common interests of the euro area. such legislation and policies will in turn necessitate the further development of our institutional architecture. one element here will be to strengthen the euro area executive with a euro area treasury, be it within the commission or as a separate body. another element will be to build up a genuine legislative capacity at euro area level and to make institutions acting in the euro area ’ s interest, such as the european stability mechanism, accountable to it. the lamfalussy moment – making the debate on emu political and then there is a third principle on which i hope agreement can be found, namely that we will see sustainable economic convergence only if accompanied by political convergence. why is that so? it is because discussions on economic governance in the euro area in recent years have revealed that we still have no common understanding in europe of what economic and fiscal policies should look like in a monetary union. bis central bankers ’ speeches a common understanding of the aim of monetary policy did develop when the monetary union was being set up ; today, we have a clear and broadly shared consensus that the ecb should first and foremost pursue price stability. we have seen a similar approach and

look at the data : this phenomenal growth brought in its wake certain undesirable consequences, like high stressed assets. more of this later. a few economic characteristics differentiate infrastructure assets from other asset classes. 1 / 5 bis central bankers'speeches these characteristics also make it more difficult to match investment demand and financing supply : firstly, infrastructure projects are often complex and involve a large number of parties. infrastructure often comprises natural monopolies such as highways or water supply, and hence governments want to retain the ultimate control to prevent an abuse of monopoly power. this requires complex legal arrangements to ensure proper distribution of payoffs and risk - sharing to align the incentives of all parties involved. secondly, infrastructure projects are long term and are therefore subject to various risks including those due to changes in policies, delays in clearances, etc. every event that delays the implementation of a project leads to cost and time overruns that in turn have a bearing on the techno - economic viability of the project or would necessitate revision in the price of the endproduct. very often the infrastructure products are meant to serve public good which imposes a limitation on ability to determine their price. thirdly, where debt financing is dominated by the banking system, the fundamental problem posed by the asset - liability mismatch is critical. in india, the dominance of psbs may partly offset this risk because the perceived assurance of government backing provides the requisite flow of deposits. because of these reasons, there are always challenge in financing infrastructure. at the same time, infrastructure sector will be a key driver for the indian economy. given the high priority that the government is according to the infrastructure sector, there is no gainsaying the enormous potential for financing the sector. as per an estimate, india needs rs 31 trillion ( us $ 454. 83 billion ) to be spent on infrastructure development over the next five years, with 70 per cent of funds needed for power, roads and urban infrastructure segments. it is essential that the stakeholders take the right steps to participate in this move and also make a decent return from this opportunity. let me quickly recall here some of the important measures that the rbi has taken to help flow of funds to infrastructure : 1. in view of the fact that projects take long time to implement during which the interest cost is part of the project cost, the importance of a specified time for commencement of commercial operations is high. taking into consideration the different reasons due to which project implementation can be delayed,