 Ladies and gentlemen, on behalf of the Bank of Finland University of Helsinki, it's my great pleasure to welcome you to this keynote address by Dr. Mario Draghi, President of the European Central Bank. President Draghi has a very long and distinguished professional career. Let me just mention a few of the highlights. His PhD degree is from MIT in 1977. He then served as a Professor of Economics in several Italian universities and also as Executive Director in the World Bank until 1991. That year he then moved to the Italian Treasury and served as Director General of the Treasury for 10 years from 1991 to 2001. This was followed by service as Vice Chairman and Managing Director at Goldman Sachs International from the years 2002 to 2005. Then Dr. Draghi was appointed Governor of Bank of Italy in 2006 and about five years later in November 2011 he became President of the European Central Bank. Following his lecture President Draghi will take a few questions from the audience and Governor Liekanen will moderate the discussion. Before I start the formal part of the lecture let me say that I see so many familiar faces and face of friends and even face of people I've really shared lots of experiences for a long period of time. I would acknowledge all of them but especially I would like to acknowledge Circa Hamalainen. It's really great to see you here as one of these people that I really like and cherish seeing. Let me acknowledge Circa because you were one of the founding fathers of the ECB. You were in the first Executive Board from 1999 to 2004. And I know you've been a friend of ECB since then and a rigorous and vigorous defender of our policies. And we also say that Circa continues to help the ECB as she is one of the ECB appointed members in the new supervisory mechanism that has taken place the banking supervision at Euro level, Euro area level just a few days ago. So thanks a lot Circa, thank you. Ladies and gentlemen a common misconception about the European Union and the Euro area is that they are economic unions without an underlying political union. This reflects a deep misunderstanding of what economic union means. It is by nature political. The single market is itself a political construction that could not operate without adequate political structures. A strong competition authority requires an executive to enforce competition policy, a legislative to write the law that enforces and a judiciary to resolve conflicts under the law. The Council, the Commission, the European Parliament and the European Court of Justice all play these roles. Likewise, fiat money is a political construct and monetary union could not operate without adequate political structures. In this case, an independent central bank has to ground its legitimacy in a precisely defined mandate that is embedded in a democratically agreed constitutional framework which the ECB finds in the EU treaties. If our union has proved more resilient over the past years than many thought, it is only because those who doubted it misjudged this political dimension. They underestimated the political underpinnings of our union, the ties between its members and the amount of political capital that has been invested into it. Yet it is clear that for all its resilience, our union is still incomplete. This is the diagnosis that was made two years ago by the presidents of the European Council, the European Commission, the Eurogroup and myself in the so-called Four Presidents report. And though progress has been achieved in some areas, it remains unfinished in others. So until we have completed the European Monetary Union, which means achieving the minimum requirements in all areas for our union to be truly sustainable, doubts about its future will never entirely fade away. And this is true no matter how much political commitment is voiced. What I would like to discuss today is what those minimum requirements are to complete our union in a way that brings stability and prosperity for all its members. When countries join a monetary union, they share monetary policy and no longer have individual exchange rates. This offers significant benefits, but it also creates costs. On the one hand, especially for smaller countries, sharing sovereignty over monetary policy is a way to regain sovereignty. Rather than having their monetary policy effectively determined by a larger neighbor, they can participate on equal terms in decision making for the entire Euro area. The removal of exchange rate uncertainty also yields immediate benefits in terms of reduced risk premium. On the other hand, sharing monetary policy and in particular an exchange rate deprives national economies of some adjustment tools in the face of local shocks. This means that such shocks have to be preempted to the extent possible through sound economic policies. It also means that when shocks do occur, as they inevitably will, adjustment has to take place through other channels. And crucially, those channels have to be at least as effective as if countries were not part of a monetary union. Members have to be better off inside than they would be outside. The reason for this is as follows. If there are parts of the Euro area that are worse off inside the union, doubts may grow about whether they might ultimately have to leave. And if one country can potentially leave the monetary union, then this creates a replicable precedent for all countries. This in turn would undermine the fungibility of money as bank deposits and other financial contracts in any country would bear a re-denomination risk. This is not theory. We all have seen firsthand, and at considerable costs in terms of welfare and employment, how fears about Euro exit and re-denomination have fragmented our economies. So it should be clear that the success of monetary union anywhere depends on its success everywhere. The Euro is and has to be irrevocable in all its member states, not just because the treaties say so, but because without this, there can't be a truly single money. What I'm saying of the Euro area could apply to most currency areas. But participation in our monetary union has different characteristics to participation in other political unions. This is particularly because we operate in an environment where there are no permanent fiscal transfers between countries, and this has important consequences. In all national economies, permanent transfers take place from richer to poorer regions, from more densely populated to more sparsely populated areas, and from those better endowed with natural resources to those less endowed. This is true in the United States, where those transfers occur through the federal budget, but it's true even within Germany, within Italy, within Finland. Such transfers, so long as they remain fair, often help cement social cohesion and protect against the temptation of secession. But as such transfers are not foreseen within the Euro area, this model does not apply for us. We need a different approach to ensure that each country is permanently better off within the union than outside. And this entails two minimum requirements. The first is that all Euro-era countries need to be able to thrive independently. This means that every economy has to be flexible enough to find and exploit their comparative advantages so as to benefit from the single market. They have to be able to allocate resources efficiently and create a dynamic business environment so that their economies can attract capital and generate enough jobs. And they also have to be flexible enough to respond quickly to short-term shocks, including through adjustment of wages or reallocating resources across sectors. This is particularly important because due to cultural barriers, labor mobility offers only a limited escape valve from high local unemployment in the Euro area, at least compared with more homogeneous unions like the US. Certainly, greater cross-country mobility would be welcome, and we should encourage measures that facilitate it. But research suggests that it is unlikely that cross-country migration flows will ever become a key driver of labor market adjustment after large shocks. And no country will thrive anyway if its population deserts it. The second implication that follows from not having fiscal transfers is that the European monetary union countries need to invest more in other mechanisms to share the cost of shocks. Many shocks can be preempted by the right policies. But for those that cannot, internal adjustment will generally be slower than if countries were able to adjust relative prices instantly through their own exchange rate. In these circumstances, some form of cross-country risk sharing is essential to help adjustment costs for those countries and prevent recessions from leaving deep and permanent scars. In our case, this means deepening financial integration in ways that improve private risk sharing, that is, through having more diversified financial portfolios that can spread risk and reward across regions, and more integrated credit markets that can smooth consumption patterns. And it means ensuring that the conditions are in place so that all countries can retain full use of national fiscal policy as a counter-seqical buffer. Let me explain these various points and their implications in some more details. Building economies that are both resilient and flexible entails that wages and prices can adjust to economic conditions and that resources can relocate swiftly across firms and sectors. We know from economic theory that this is crucial in a monetary union to ensure that adjustment happens through prices, not quantities, that is, through unemployment. And we've also seen this play out in our direct experience. During the crisis, countries with more flexible economies have on the whole adjusted faster and with a lower employment cost. This is evident, for example, if one compares the experience of Ireland and Latvia with that of Spain, Portugal, and Greece. We know as well that economies that are flexible and can allocate resources efficiently benefit most from the single market by exploiting their comparative advantages. And where populations are aging, they also have the best chance of raising potential growth. This is again true in theory, but also it's visible in practice. To give just an example, the World Economic Forum ranks Finland fourth in the world in terms of global competitiveness, whereas Greece is ranked 81st. Until now, such differences in the structures and institutions of our economies have largely been seen as a national concern. Countries that reformed their economies and improved their business environments were seen as the chief beneficiaries of their efforts. And if some countries did not reform, it was largely believed that they would be the only ones to suffer as a consequence. This understanding was reflected in the fact that while monetary policy became European, foreign parts of economic policy remained at national level. And we relatively lose common governance. This seemed natural as many of these policies such as labor market institutions or social protection schemes are deeply rooted in a country's social model and national traditions. But with the benefit of experience, I'm skeptical as to whether this view is still valid. That economies can adjust and grow is in fact very much a concern for all others. If some countries in monetary union perpetually adjust more slowly than others, they are likely to have consistently higher unemployment. And if they also have lower growth potential, then that unemployment is more likely to become entrenched and structural. In other words, lack of structural reforms raises the specter of permanent economic divergence between members. And in so far as this threatens the essential cohesion of the union, this has potentially damaging consequences for all monetary union members. Seen from this perspective, Euro-era countries cannot be agnostic about whether and how others address their reform challenges. Their own prosperity ultimately depends on each country putting itself in a position to thrive within the union. And for this reason, there is a strong case for sovereignty over relevant economic policies to be exercised jointly. That means above all structural reforms. This was the starting point for the reflection that began with the Four Presidents' report in 2012 on building a genuine economic union for the Euro area. And to my mind, deepening economic union would mean two things. First, in the short term, using more effectively the rules and procedures we already have, such as the European semester. This means making all parties more accountable for ensuring that recommendations are well targeted, closely monitored and followed up. And it means actively using the corrective tools that are there to tackle large imbalances such as the excessive imbalances procedure. Second, over the long term, acknowledging the community of interest, the reality of spillovers in the form of a real sharing of sovereignty in the governance of structural reforms. That is, shifting from coordination to common decision making, and from rules to institutions. As I said, however, economies will never be so flexible that adjustment happens as quickly as if they had their own exchange rate. There will always be short-term costs. And so to ensure that countries are better off being in the union when a shock hits than they would be outside, we need other ways to help spread these costs. In a monetary union like ours, there is a particular onus on private risk sharing to play this role. Indeed, the less public risk sharing we want, the more private risk sharing we need. Private risk sharing chiefly comes through a well-integrated financial system. Private portfolios make balance sheets more resilient to local shocks and allow the effects of those shocks to be dispersed across countries. And integrated credit markets allow firms and households to smooth any negative effects on income by bringing forward future consumption, which in the euro area essentially means borrowing from countries that are less affected. In other words, financial union is an integral part of a monetary union. The United States provides an example of how effective private risk sharing can be in a monetary union. A well-known study found that around two-thirds of economic shocks are absorbed via integrated financial markets in the United States. By contrast, studies on the euro area suggest that credit and capital markets are much less effective in smoothing income. The explanation for the limited degree of risk sharing in the euro area can be found in the relatively shallow type of financial integration that evolved before the crisis. In the banking sector, integration of interbank markets proceeded much faster than integration of retail markets. Thus, most banks' assets remained concentrated in their local markets, while their liabilities were mainly comprised of short-term debt. This meant that when a large local shock hit, they were exposed to heavy and concentrated losses. And rather than sharing those losses, their creditors were able to, as we say, cut and run. The result in financial fragmentation also meant that cross-border credit markets could not do their job. In this context, banking union represents a vital step forward in creating the conditions for a higher quality of financial integration. Single supervision and resolution should be catalytic in lowering the hurdles to cross-border activity and encouraging deeper retail banking integration. In the process, this will create more private risk sharing within the sector. Banking union is now well underway. The single supervisory mechanism took over supervision of euro-area banks earlier this month. Its founding act, the comprehensive assessment of banks' balance sheets, was successfully completed the month previously. And the single resolution mechanism will begin on January 1st next year. But limited risk sharing within the euro-area is not just about banks. It also reflects our relatively incomplete capital markets, and in particular, equity markets. Those markets are the most effective for absorbing losses. Yet only 44% of equity issued in the euro-area is held by other euro-area residents. So if we are to deepen private sector risk sharing in the euro-area, we urgently need to address the barriers to capital market integration. This is no doubt a complex issue, as it extends into multiple aspects of national law. If we don't want a transfer union, then we have to be consistent and establish an environment where other mechanisms can work. This means, first, advancing with the agenda of the new commission president to establish a genuine capital markets union in Europe. And second, establishing a genuine economic union in parallel. If countries are to attract capital and benefit from financial risk sharing, then it has to be attractive to invest in these countries. And this can only be achieved if, over the medium term, all countries have sufficient adjustment capacity and growth prospects. Yet, with full implementation of these unions, we could still not call the European Monetary Union complete. We also have to acknowledge the crucial role that accrues to fiscal policies in a monetary union. A single monetary policy focused on achieving euro-area price stability cannot react to shocks that affect only one country or one region. And we do not have a federal budget that can respond instead, as in the United States, for example. So for as long as this situation persists, it's absolutely essential the national fiscal policies can perform their macroeconomic stabilization role alongside monetary policy and react whenever a local shock occurs. Fiscal policies are in fact particularly relevant for us, as a recent study demonstrates that 47 percent of an unemployment shock is absorbed by the automatic stabilizers in the European Union, compared with only 34 percent in the United States. For national fiscal stabilizers to be able to play out in full, sovereign debt has to act as a safe haven in times of economic stress. If it instead acts like private debt, and borrowing costs rise under stress, governance market access becomes constrained at precisely the moment they most need it. Then fiscal policy risks becoming pro-cyclical. There are in principle two ways to protect the safe haven status of sovereign debt. The first is a strong fiscal governance framework that is implemented in a credible manner. This means having sufficient baffers over the cycle to absorb exceptional shocks and having public debt levels that are sufficiently low in good times that they can rise in bad times without disrupting market confidence. The second way is for some form of backstop for sovereign debt. In the Euro area, due to various aspects of our institutional framework, we have very much pursued the first approach, strong fiscal rules. This provides an essential anchor for confidence not only for investors, but also among firms and households, and crucially between countries. The importance of each country sticking to its commitments under the stability and growth pact should therefore be beyond debate. Indeed, that a sound fiscal framework is necessary in a monetary union goes without saying. Whether it's sufficient to safeguard fiscal policy as a stabilization tool, however, has been challenged by our experience during the crisis. The European Monetary Union framework was grounded on the assumption that keeping one's fiscal house in order would be enough to ensure market access and ward off contagion. And to be sure, countries with more robust fiscal positions have, on the whole, enjoyed easier financing conditions and have been more protected from spillovers. And we've also seen that this protection is not absolute. Ireland and Spain, for example, had low public debts and deficits on entering the crisis, yet suffered serious contagion from Greece. And during the face of the crisis, where contagion within the Euro area was at its worst, almost all countries saw their credit default swap spreads rise. In other words, as panics can happen in financial markets, even abiding fully with the fiscal rules cannot provide a cost-iron guarantee of affordable market access. So what can governments do in these circumstances to safeguard fiscal policy as a stabilization tool? First, this is precisely the kind of situation I mentioned earlier, where we can and should aim to better preempt economic shocks. The SSM, the single supervisory mechanism, is particularly important in this context, as it should help prevent the kind of large financial imbalances we saw in countries such as Ireland and Spain, which subsequently spilled over onto the public sector. Second, markets are less likely to react negatively to temporarily higher deficits if government debt is clearly sustainable over the medium term. This can be in part achieved through credible fiscal plans, which act on the numerator of the debt-to-GDP ratio, but it also has to involve raising potential growth through structural reforms which would act on the denominator of this ratio. And for this reason, governments, in fact, have a further incentive to enter into closer economic union. And so far as this acts as a commitment device that reforms will indeed be implemented, it will help to raise future government income and improve debt sustainability. And in doing so, it can even help create fiscal space today. Moreover, using EU funds more effectively to boost both current demand and future potential, which means raising investments, would have a similar effect on growth and debt sustainability. I therefore welcome the Commission's new proposal to stimulate investment spending in Europe. What matters is that its size complements the fiscal stance of national governments, that it is deployed quickly so that it can support demand, and that it is targeted towards those sectors where its impact on potential growth will be the largest. Still, a third conclusion seems unavoidable, that no form of stronger governance can entirely remove the risk of self-fulfilling liquidity crisis. I don't think this is a controversial statement. It's already been acknowledged with the creation of the European stability mechanism. And it is also what motivates the ongoing discussion on establishing a backstop for the Single Resolution Fund. The idea is to prevent sovereigns from losing market access based on self-fulfilling expectations of future bailouts. So over the longer term, it would be natural to reflect further on whether we have done enough in the euro area to preserve at all times the ability to use fiscal policy counter-cyclically. But it's also clear that such a reflection would have to be part of a larger discussion on how to reinforce common decision making over fiscal policies and strengthen accountability arrangements. In other words, and this was made amply clear in the Four Presidents' report at the time, all this could take only place in the context of a decisive step towards closed fiscal union. And to make that step, we would need first to see a process of convergence in economic and financial policies in the ways I have just described. This brings me to my conclusion. What I have argued today is that doubts over the viability of the European Monetary Union will only be fully removed when we have completed it in all relevant areas. This means banking and capital markets union. It means economic and fiscal union. In a monetary union, no policy area can be seen in isolation. Each interacts with and affects the other. And as such, completing the European Monetary Union in all areas strengthens and underpins the others. Monetary union is indeed more effective in securing the fundamental interests of citizens when common interests are recognized as such. And when responsibilities that come with participating in a community are assumed in full. In other words, its ultimate success depends on the acknowledgement that sharing a single currency is a political union and following through with the consequences. And that requires commensurate accountability and transparency arrangements. All countries must benefit permanently from participation in monetary union. And this means that the requirements I have laid out cannot be met only at the time when a country joins the union or for some of the time. They have to be met all the time. They have to be revocable features of participation in a monetary union. And for that reason, the institutional arrangements that ensure that those requirements are met must be ultimately be binding in nature and permanent in form. Thank you. Thank you very much, President Draghi, for your broad analysis of the State of Economic Monetary Union. Now, you have kindly promised to reply to a few questions. So perhaps we take a few and we can regroup them afterwards. You can then reply perhaps two, three at one time. Who will start here? Please. Okay, can you say your name first and then the question? I take three. Juhal Olnesto, Derits Analyst, OP Bank. You have previously said that Central Bank's balance sheet size and composition matters and you get... I'm sorry. Balance sheet... Size. Balance sheet size and composition matters. And you gave Japan as an example. Given the recent economic development in Japan, how convinced are you on benefits of balance sheet expansion of the ECB for Euro area economy? And we have Professor Ripatti here from University of Helsinki, Professor of Economics, please. My question is related to the Monetary Union and the Banking Union. Recent financial crisis has highlighted the interconnection between the macro stability and the financial stability. It also raises the questions of the connection between the macro... How, whether to coordinate and how to coordinate the macro prudential instruments and the monetary policy instruments. Do you see any conflicts, potential conflict between these two sets of instruments? And we have a new member of European Parliament, Olli Rehn, here, who wants to ask the question. Thank you. Thank you, Erki. President Dranghi, Ciao Mario, welcome to my alma mater and constituency. And thanks for an excellent speech with conceptual clarity, as always. I would like to ask about investment, because in the past efforts, we were able to stabilize the European economy, start the recovery, and now we need to focus on growth and investment. And I felt a bit that you avoided one elephant in the room that is the surplus economy of Germany and its significant fiscal space. I agree that, say, France, Italy, or Finland wouldn't have too much room for fiscal stimulus, but Germany with its 67% current account surplus and fiscal space would have, and I believe that it would be important that Germany would increase investment and thus support demand. I wonder if you agree with this, or how do you see this? And further, could the ECB, by its own actions within its mandate, support the commission and the ECB in the investment program and its successful implementation? For instance, by purchase of government bonds, which might also lead to a further depreciation of the euro, which we would not necessarily mind. Maybe you can comment on this as well. Thank you. Thank you. Perhaps start with these three. Now to the first question. First of all, let me say that in the course of the last few months we've taken considerable range of monetary policy measures that the so-called TELTRO, the target long-term refinancing operations, the decision to start a purchase program of cover bonds, and ABS. We are confident that these decisions will have an impact on our median term inflation expectations and will have a sizable impact on our balance sheet, which we expect to return at the level it had in the early 2012. But having said that, either some of these measures are demand-driven, so they are very hard and difficult to forecast right now, we'll know more, by the way, with the second TELTRO and the others in the coming months. But having said that, if these measures were not enough to underpin the median term inflation expectations, or if our outlook were to worsen for other independent reasons, the governing council is, and it said it on and on in several statements, is unanimous in its commitment to use other unconventional instruments, and recently went so far as saying that it tasked the ECB staff and the relevant committees to start preparing for this contingency. In other words, the governing council, if needed, is willing to act within its mandate, of course, and be ready to do so. Now, what assets, all range of assets, at this point of the discussion, the discussion is quite open, it's been going on for several, in several meetings. I was not actually, when I made reference to Japan, I was not singling out that country especially for its successes, but simply to say that in some cases, there is, in some cases, QE, why is Japan interesting? Because the spreads and interest rates are as low as they are in the Euro area, while when the US and UK undertook QE, their spreads and interest rates were much, much higher. And the idea being that QE might have been effective in Japan, even though the spreads were so low. So that is, that was the reason why I quoted Japan in a recent speech. But when we look at this situation in Japan and whether a certain monetary policy has been effective or not, we should also consider other policies that have been undertaken in the meantime, namely fiscal policy. And by the way, we should always have the same, this in mind, even when we compare our monetary policy with the US monetary policy or UK monetary policy or other situations where the fiscal policies that these countries had in place were vastly different from the fiscal policy that we have in place in the Euro area. The second question is about the relationship between macro prudential and monetary policy. We have two, at least two sets of coordination issues. First of all, let's consider that macro prudential policies, let's consider the case where macro prudential policies do address local risks to financial stability. So particular markets becoming exposed to sort of a bullion behavior. In that case, the coordination problem is between the ECB and the local supervisory, macro prudential supervisory authority, which usually is the national central bank, but not always. And the way the system we put in place is that basically the two would work together, both in terms of information flows and decision making. And we have a committee, the Financial Stability Committee, where the macro prudential policy of the future will be undertaken by all the members of the ESCB. So not only by the ECB, but all the members of the ESCB. And often the supervisory board itself will meet back to back with the Financial Stability Committee. So we make sure that we have the central monetary policy institution, the ECB, the national central banks there, and the supervisors, the banking supervisors, also part of this discussion. The second coordination issue is of a different nature, and it can be addressed asking a question. If we see that a certain real estate market, for example, shows signs of having a bubble, or even corporate bond markets showing signs of having a bubble, would this be enough to justify a different monetary policy where we would raise interest rates, for example, when the monetary policy stands for based on considerations of price stability, would not justify that? And the answer is no. No. The first defense against bubbles is certainly macro prudential policies. Then we have a third case, which is much harder to understand. And that's when you have a systemic financial instability, like the one we had during the great crisis. But that, and frankly there, the coordination problems become much, much more complicated. But however, we had that crisis because we let it happen through a variety of regulatory mistakes, and perhaps also macro policy mistakes. So we should now make both our financial sector more resilient, strengthen our macro prudential instruments, be careful about having the financial stability dimension in mind when we do our monetary policies, but also be careful and not misusing the monetary policy instrument. Finally, Olli, you still have this problem with fiscal policy in Germany, it's just, it's, okay, but the question is actually complex. We, first of all, let me say one thing, fiscal policy at the present time is judged to be aggregate fiscal stance, is judged to be neutral. That's not contractionary. It's also true, however, that the, if we look at reality from our own angle, the inflation expectations are at 0.4 percent, sorry, inflation is at 0.4 percent, and inflation expectations are just within the range that we consider compatible with price stability. However at the shorter horizon, they have considerably declined. This is a situation which needs very, very close attention, and the reason why it does so is that our nominal interest rates now are at the zero lower bound, so if inflation expectations keep on declining, we're going to have higher real rates, and that's exactly the last thing one wants in the present, in the present conjuncture. So that's why, in a sense, fiscal policy has become even more important now. But it has to be, if we think about possible fiscal expansion, the first requirement is it has to be done in a confidence enhancing fashion. So we have rules. The respect of these rules is fundamental for confidence enhancing, and it's not so much the squabbling about half a percentage point of budget deficit that is, it's not so much the substance, it's importance, it's that we gave ourselves these rules, and we are being judged by the rest of the world on whether we are capable of living and working together, and therefore respect the rules that we ourselves have given and established. At the same time, countries that have, by the way, we also think that within these rules there is flexibility that can be used, and is being used. Then we have countries that do have fiscal space, and certainly fiscal expansion is highly welcome. Again, it should focus on investments, it should focus on raising potential output, it should focus on lowering tax rates, but are we really convinced, and that's the next question which really, in a sense, it's easy to ask out questions and not providing answers, but are we really convinced that the realistic fiscal expansion in Germany would change the lives of 350 million people all around the Euro area? And the answer is hardly so. So that's why we welcome very much the decision taken by the Commission with this investment plan, and then you ask me what the ECB could do. The ECB, you know, has a mandate, which is price stability. We think we can help this indirectly strengthening the banking system. Certainly a healthier banking system will be much more able to participate in this plan, which this plan, you know, is highly leveraged, and so it does require the participation of private investors as an essential component. And so the currently banks are much healthier, much more resilient, much more able to participate into this plan. So in this sense, the ECB might help and contribute to that. Thank you. We can take two more questions if you just limit yourself to a question. Timo Harakka, who is a writer, journalist, and what else? You have a... Almost a member of the European Parliament. Thank you very much for your enlightening speech. You touched, again, the new investment fund announced by the Commission President yesterday. What's your assessment of the structure of the fund? Do you think it's realistic to expect 250 billion euros of private investment against a rather paltry public guarantees? And thirdly, could ECB be part of buying these assets? Thank you. The next one is Pekka Korpen, who is normally resident in Rome nowadays. But he was at World Bank, I think, in 1980s. Absolutely. So we have met there, you know, Pekka Korpen. Ciao, Mario, it's great to see you. The surprise after a few years. Yes, indeed. I have a very easy question to you. When you recommended flexibility, sort of, internal devaluation, instead of actual devaluations, don't you see the risk that we are returning to the 19th-century system, a cold standard where, in fact, it was sort of a sterling monetary union? And the prices were, in the agricultural society, very flexible, indeed. But what happened was that you got very long price swings, a long period of deflation when there was adjustment. And this was, of course, Nordic economist Wichsel, who made famous cumulative deflation and inflation processes. Don't you see that when, after all these structural reforms, we are entering the 19th-century with very devastating deflation periods? Japan is sort of initiation to that. Thank you, Pekka. I see that your sort of political orientations don't change much. No, I mean, I'm saying this in a positive way. It's consistency through ages. On the first question, unfortunately, I can't answer because I don't know enough. I don't know enough of the structure of the fund. And right now, I don't know enough on whether to say the ECB could do more than participate into this plan just indirectly, in other words, strengthening the banking system. So forgive me for this, but I'll have to read through the fine print of the fund before I can say exactly how it works. On the second point, first of all, the 19th century was a world system. Here is a regional system. So it's not that countries have lost completely the flexibility of their exchange rate in creating the monetary union because they still have the flexibility of the exchange rate of the euro. But certainly, in joining the monetary union, they have lost some of the exchange rate flexibility. And so the adjustment has to happen through internal devaluations. Now, that's the reason why. Now, first of all, why should the adjustment happen? So the answer to this is another question. Would it be imaginable that we have a union, a monetary union, based on permanent creditors and permanent debtors forever? At the present time, such unions do exist. The United States, for example, is a situation where there is a state, Oklahoma, which is a permanent debtor. A New York state is a permanent creditor. But is it at the stage of our political development, is it realistic to think that such a union could exist in our case? And that's why, in a sense, we go back to the speech before politics and economic integration are intertwined here. And the sense is that it's not realistic at this point in time. So countries that have been debtors, gradually they will have to adjust. And so the sort of discipline, the policymaking of a monetary union is very different from what you would do if the country were outside the monetary union. So in the years pre-crisis, they have been gigantic transfers into countries that simply were living on credit, both the private sector and the public sector. And they let happen two things. Debt would go up and prices would go up. They become uncompetitive and they finance this progressive loss of competitiveness through a credit flow. At some point this changed. At this point, this credit would not flow any longer. So they had to become competitive. And they had to bring back those prices that have gone up with no relationship whatsoever with productivity back to a level where these countries would be competitive. That's the sort of adjustment we have. What's the lesson, well, there are many lessons that one could draw, but what's the lesson, the main lesson that I would draw from this experience is that we should be very careful within a monetary union not to let our wages and prices go off the line. We should be very careful in maintaining these countries competitive within the union, first and foremost. And we should be very careful in not letting debt levels go out of hand because then we would be, in a sense, punished not only by markets but also by the freezing of financial flows that had took place, for example, during the crisis. Thank you, President Rocky. Thank you, Mario. I think we should give you applause for the great space and discussion.