 of chairing this first panel and then the third panel. While Melinda Crain, who's here in the audience, will chair the other two. Before we start, I just want to say a word of thanks to the ECB and to Ignatio Angeloni for inviting me here today. Throughout these years, I've had the pleasure of having many exchanges with Ignatio who's really enlightened me on the word of banking supervision, which can be rather obscure at times. I really appreciated those exchanges we had. And I look forward to his many contributions, which I'm sure will come in the years ahead in his new life outside of the ECB. If a life outside the ECB is possible, I don't know. But before we, so let me start by introducing the speakers of this panel. The first intervention will be by Guido Tabellini, who will be the leading speaker of this first panel. Guido is in Teza San Paolo chair in economics at Bocconi University in Milan. And he will speak for 20 minutes, mainly talking about a paper he's been writing on whether Europe is an optimal political area. And then after that, we'll have two discussants. The first will be Daniel Gross from the Center for European Policy Studies. And then Beatriz Veder Di Mauro, who is a professor at the Graduate Institute in Geneva, and in Singapore as well at the INSEAD Emerging Market Institute. And he's also the president of the CPR. So I will start with Professor Tabellini, who has 20 minutes. And then at the end, there will be time for questions, both from me and from the floor. OK, good morning. And thank you for inviting me. Thank you to Inazio in particular. I met Inazio for the first time many, many years ago. We were both young teaching assistants at Bocconi University. And since then, we kept in touch and interacted in many ways. So I want to start by presenting some ideas in a joint work with Alberto Alizina and Francesco Trebi. But then I will deviate from that at the end and add my own personal thoughts about these issues. So this is how two European countries saw each other a few years ago. On the left, how Germany was looking at Greece. On the right, how Greece was looking at Germany. So these two pictures would suggest that it's not very encouraging to think about political integration in Europe because we are just too different. There is not enough trust and mutual respect. And in this paper, I want to suggest that this is actually not necessarily the case. And the stumbling blocks towards further integration is not that we are very different as European citizens, but lies elsewhere. And in thinking about these issues, I want to use a concept that was introduced years ago first by Robert Barrow and then elaborated further by Alberto Alizina with Espolora. Namely that to think about whether an area is an optimal political union, we should think about an optimal trade-off between the benefits and the cost of political integration. The benefits are exploiting the economies of scale and scope in public good provision that typically would be larger if you are bigger. And the costs, according to this literature, is heterogeneity in preferences. Some people will be in a minority, and if we are very different, it will be more difficult to bargain and to come to efficient decisions. Now, if you think about the trade-off, it's pretty obvious to European citizens, not to elites, but to European citizens, that the economies of scale and scope in further integration in some areas are very large. This is how respondents to the Eurobarometer in 2016 answered the question of whether they were in favor of more EU-level decision-making in these areas. And as you see, a predominant majority is in favor of more decision-making at the EU level in fighting terrorism, in promoting peace and democracy and foreign policy, environmental policy, immigration policy, and energy. So what we do in this paper is to try and evaluate the other part of the trade-off, namely how different are we in assessing policies. And in particular, we focus on deep cultural heterogeneity between European citizens. And we also ask whether integration has made the integration that we have seen in Europe through mobility exchange of people trade has made this trade-off between economies of scale and heterogeneity more or less favorable over time. And so these are the specific questions that I want to address. How different are European citizens in their deep cultural traits? And the benchmark of comparison is within-country heterogeneity and also the US. And then have we become more similar or more different from each other over time? And then I will conclude with some discussions. The sample of countries is the EU-15 plus Norway. I'm not sure why Norway is in the sample. We started with it, and we never excluded it. But the important point to note is that a central and eastern Europe is not in the sample and also the questions that we exploit and before the financial crisis in 2008. So since then, maybe things have slightly changed. And we take from the European Value Survey, a broad national survey that has been asked in these countries regularly, 20 questions on deeply held cultural traits. We think of integration as a marriage. When you enter into a marriage, you don't want to ask about taste for food or wine. You want to enter into a very incomplete contract, and you want to know whether you share the same vision of life as your partner. And so here, we look at very deep features that previous literature on the subject has shown to be fairly stable over time and persistent. So religiosity, not religion, but how religious you are. Issues about the role of women in society and in the marketplace. Issues about sexual morality. Issues about the role of the state on redistribution versus individual responsibility on the protection of property rights on political ideologies. And then specific values and civic capital like generalized trust. Qualities that you appreciate in children like hard work and self-fitness obedience or your willingness to self-determinate your faith in life. And let me emphasize that the results that I'm going to present are fairly robust to only considering a subset of these issues. So the first question is, how different are we? We have, think of this as a data point in our sample as a vector in a 20-dimensional space. So each individual responds to 20 questions. And then we formalize our analysis in the following way. We take two individuals at random within each country, two Italians, and two individuals at random belonging to different countries, an Italian and a German. And we ask, how different are these two vectors of 20 responses? And this is the distribution of bilateral distances. The solid line is for two individuals belonging to different countries. And the dotted line is the distribution of bilateral distances for two individuals belonging to the same country. On the left, it's the raw data. On the right, it's after you condition on individual features such as age, gender, education, and so on. And so as you see, the distribution goes from 0 to 1 by design. These questions have been scaled and normalized so that the distribution lies in this range. But what is striking about this picture that we didn't expect when we started this project is that two distributions are very similar. The average distance for individuals belonging to different countries is only about 5% higher than the average distance for individuals of the same country. So we are very similar. And this is not because we are similar, but because we are very different within countries. So we tend to forget the extent of huge heterogeneity that there is within each of these well-functioning democracies. And I think that's the core message of the paper in the end. Then we ask a second question. We ask, what is the cultural average of these traits in Europe? So we have all these many vectors. We compute the centroid. So think of this as the vector average of these cultural traits. And then we can compute the distance of each individual from this average European cultural trait. And because we know the region of residence of each of these respondents, we can compute the average cultural distance of each region from the cultural center of Europe. And this is shown in this map. Lighter color are closer to the cultural average of Europe. Darker color are further away. The Switzerland is missing, so it's not a very light color. But what this map is telling you is that the lighter color are here in Germany. So the cultural core of Europe coincides with Germany. It's the regions that are closer to the average European cultural traits. Notice that this is unweighted by population. If we weighted by population, this, of course, would be true even more. So there is a sense in which the cultural core coincides with the economic core. However, perhaps surprisingly, it's not true that the economic periphery is also a cultural periphery. Spain is closer to the cultural center than France. And France, as we know, is a bit peculiar in its cultural traits. So I think the messages here are the cultural core coincides with the economic core. The cultural periphery does not coincide with the economic periphery. There is also, as you see, a lot of heterogeneity within countries and within regions. We also, I don't have time to show the results, but we also relate this individual distance from the cultural center to individual attitudes towards European integration. And not surprisingly, individuals who are closer to the center in terms of cultural traits are more in favor of European integration, suggesting that this is not such a bad measure. But nevertheless, European attitudes in favor of European integration are largely unexplained. So that's, I guess, a further point to substantiate that this cultural difference maybe are not so relevant. So that's the conclusion to the first question. We don't differ so much relative to heterogeneity within countries. Then we repeat the same exercise for the US. Here we use another survey. We only use 15 questions, because we want to make sure that they are identical to those that are asked in the US in Europe. We aggregate respondents so that we have enough respondents by area. This leaves us either with nine large states or with five US macro regions. The results are similar. And this is what happens. So the top, again, the left is the unconditional distributions. The right is the conditional distributions that you take into account individual features. The top is the distribution of bilateral distances for two US citizens belonging to the same state or two different states. You see only one distribution, because they are superimposed. So this suggests that in the US, the heterogeneity within states is essentially the same as the heterogeneity between states. So maybe this is because there is less heterogeneity between states than in the US than there is in Europe. This is not actually the case. So the remaining two rows show that this is the Europe versus the US within states and Europe versus the US between states or countries. And what those two rows say is that within states there is more heterogeneity in the US than in Europe. But between states, there is the same heterogeneity in the US as between European countries. So again, same conclusions. If we compare the US and Europe, the extent of cultural heterogeneity is essentially the same in these two areas. Last question, has the cultural heterogeneity decreased or increased over time in Europe? And a priori could go either way. You would expect that further integration, mobility of people, trade has made us more similar. But the trade also leads to more specialization. So maybe we have diverged. And the answer is we have diverged. So this is now plotting distributions in the first wave, so 1980, and in the last wave, 30 years later, 2008. The first row is the distribution for individuals belonging to different countries. And the dotted line is 1980. The solid line is 2008. So the distribution has shifted to the right, meaning that we have become more different between 1980 and 2008. However, the same has happened within countries. So the second row plots the distribution in 1980 and 2008 for individuals belonging to the same country. And again, there has been some cultural divergence there as well. So the bottom line is, yes, we have become more different, about a bit more than 5% in terms of average distance. But it cannot be blamed on European integration per se because the same phenomenon has occurred within countries. And when we look at the US, the same phenomenon has also occurred in the US. So perhaps it's a general feature of the fact that the knowledge economy induces more polarization within countries between more educated and less educated. And what we are seeing is a result of that. We also look at more specific cultural traits. I don't have time to go into the details. But the bottom line is that behind this divergence between countries that I have illustrated, there is some evidence of divergence between northern Europe and southern Europe. So all Europeans has become more modern in their cultural traits. But northern Europe has done so at a faster rate than southern Europe. And this, unfortunately, has also taken place in the functioning of institutions. I don't have time to go over this. Maybe somebody else will comment. But the paper shows that this is also happening, a little bit of institutional divergence due to northern Europe gaining in the functioning of its institutions and southern Europe lagging further behind. So that's the answer to the last question. So let me conclude with some discussion. So I started by referring to the idea that in choosing whether or not to integrate, we should look at the trade-off between economies of scale in public good provision versus the cost of heterogeneity. What this analysis suggests is that the stumbling block that is preventing further European political integration should not be thought of as heterogeneity in these deeper policy or cultural preferences. So I'm not saying that we are ready to integrate tomorrow. I'm saying that we ought to look for the stumbling blocks elsewhere. And I think there are two areas where we should look. One is identification with the nation versus Europe. Because of languages, because of histories, we are more willing to compromise with our different Italians than we are with members of other nationalities. And so national identities rather than European identities is one big issue, which suggests that these national identities are somehow also leading us to stereotype differences and to have prejudices that make us less effective in working together. The second issue is probably related to economic asymmetries and economic divergences that is creating mistrust as in the initial slide of Greece and Germany. So let me just show you a couple of data on this. This is the percentage of people who are proud of their national identities in these same surveys. And unfortunately, the message here is not very reassuring if you want to think about European integration. Because in all countries, there is an increasing trend in nationalism. This is before 2000. It ends in 2008. So the financial crisis probably increased this much further. There is a lot of heterogeneity between countries. But the trend in nationalism is a long-term trend. It's not just due to the financial crisis. If you look at another question, the message is a bit more reassuring. There is a question that asks whether you feel both European and national. And the trend there fluctuates, but it is stable over time. So we are more proud of our national identities. We are not necessarily feeling less European. The second point, namely the importance of economics and economic divergence, is also relevant. And here, I'm illustrating the percentage of people from the Eurobarometer who perceive European membership as a benefit on the vertical axis, on the horizontal axis, the unemployment rate. Both are changes. And the change is measured between the beginning of the financial crisis in 2013, arguably the end of it. And you see that where unemployment increased more, the percentage of people in favor of European integration has dropped. And where, instead, unemployment has been stable or reduced, the opposite is true. This is true also in a longer time horizon between 2002 and 2017. It's true for other questions that are like making my voice count and whether I think that my voice counts in the European Union. So what these data are suggesting is that my attitudes towards European integration are very much affected by economic conditions. And particularly so during the financial crisis, but more generally. And this has also been established in other independent research. So to close, what are the implications of these facts and these ideas for people who want to push further European integration in other political areas? Well, I think I've listed four points. We should pay attention to economic divergence, particularly within the eurozone, because this is a stumbling block. So this suggests that economic divergence is not only a national problem, it's also a European problem that, of course, should matter for all. Second, if we think at how to overcome nationalism, looking at the history of national member states suggests that education should play a fundamental role. Public schooling was designed on purpose to foster a sense of national identification. And there is nothing wrong in thinking that we can do the same to some degree by coordinating on some features of European school curricula that would emphasize teaching about European heroes, but also about European institutions to foster a greater sense of identification. Third, the method with which integration is achieved also matters. Of course, if integration is achieved through the intergovernmental methods, this is going to reinforce national identities because politicians will want to bring trophies at home. If instead we achieve integration by designing common institutions like DCB, this is more likely to foster national identification. And finally, of course, let me just remember that Eastern Europe is not included here, and maybe the results that I presented would not apply to all of these countries. Thank you. Good morning. And let me also add that I'm honored to be here. And I have a task here is a discussion of an excellent and provocative paper and an introduction by Ignacio, which focused on his own career and the issues of the institution in which he is living, namely the challenges for supervisors and central banks. So is there? Did you take the? Oh, yes. So what I wanted to do is perhaps to limit myself to two comments, which try to look at the intersection between the overarching theme which Ignacio proposed and the very broad sweep which then Guido went into. Namely, what are the challenges for supervisors and central bank in the European context? And as you have just heard, the message from Guido is essentially a positive one. He's saying we shouldn't have more difficulties than the US, and then the US is a well-functioning monetary union. OK, that second part, I think, we have to put some doubts, some question marks behind, but let us accept that part. So let me therefore concentrate on two specific points, the points which he also then took up in his conclusions, namely economic divergence in the EU and how important that is for the acceptance and the politically underpinning. And then the case you raised by Ignacio, which is one of independence. And here I wanted to come back to the specific European context, which in my view, at least if it looks at recent developments, raises additional challenges to the ones that meant Ignacio already mentioned earlier this morning. So the first point is basically just a graph which Guido had just shown, which just takes his curve of the relationship between people who think that EU membership is a good thing and the change in unemployment rates. And the interesting point which comes out of that graph, which Guido just mentioned that if you go right to the zero change line, then you see, actually, you have an increase in the popularity of the EU. So for a country, and that should be the average, which has zero change in the long run of in its unemployment rate, actually the popularity of the EU has increased. So my point would be that what is really important for the US not so much this horizontal, but the vertical position of the curve. So if you just take then the levels, this curve seems to have shifted between 2002 and today. And that is what I find encouraging. And that is what I would put forward as perhaps one of the key findings, which is that even if you have very large differences in economic performance, still on average, the popularity of the EU has increased considerably over the long term. And that has also implication more broadly when I take one point which came up obliquely only in Janiac's presentation, namely that the supervisor is the defender of the public interest, comma, of the taxpayer. You said everybody's a taxpayer. Now, we all know that in Europe, we have in the first instance, national taxpayers. They feel they are paying nationally. And then delegating that authority to have decisions being made by an organization in which the national representative is only very small part of the overall decision making process creates some difficulties. But these difficulties are, of course, mitigated to the extent that people think we are part of a bigger whole, the EU. And my point of view would be that part of the fact that we were able to go from basically zero European input into very strong European input in supervision was also due to the fact that in 2000, when you started, there was very little feeling of or very less strong feeling of being part of the EU. And therefore, the facile argument, supervision has fiscal consequences, fiscal policy is national, and therefore, it has to remain national. That argument has become less strong over time. Of course, this banking crisis added an additional element out to it, an important one. But I think that was also behind that shift, which you have seen in your career in Atom. But let me come back to a second point which Guido mentioned, en passant, which is the divergence in institution, or special institutional quality. I'm showing you here just a graph which is in his paper which says that the difference in the quality of the institution of the local, national legal institutions has increased. And I think that is one of the key challenges in a number of member countries. Fortunately, these are usually what one would call peripheral member countries. But when we talk about independence, we usually take as granted, we have institutional provisions, comma, and they work. It's written in the law. Unfortunately, that presupposes that the legal institutions work, that the judiciary works. And in some countries, that is not the case. In some countries, it is perhaps less the case. It's not 0, 1. And that is, as a matter of fact, actually one of the biggest problem facing supervisors in many countries in the EU. And that's why this divergence in the institutional quality that Guido shows is so important. Now, what is to be done? Now, assuming still that the EU legal framework works well, as it is written in statute, then the first reaction would be, perhaps we should reduce, even further, the room for maneuver and for discretion of the national authorities. Not because it might be the optimum for everybody, but because, unfortunately, there's a number of countries where we cannot trust that the legal institutions might not be misused by either political or actually economic interests. And the second point would be that we need mechanisms to protect the de facto independence of national supervisors, thinking about the national public prosecutor, actions, the ECBs undertaking, and so on. This might be very important steps that we need to take so that the trust in everybody in the quality of our supervisory framework remains intact. And the last point for me is actually open. Assuming that the problems of legality remain limited to a few peripheral countries, but the key question still is, what are the incentives for a supervisor who might face threats at home? But threats which are usually linked to national interests, what incentive does he or she face when operating in a European context, when having to contribute a decision about other cases? Because this is what the de facto state of affairs which we have in Europe. We have a European supervisor, but the students are being made by nationalists or with large input by national representatives or by people nominated at the national level. What are their incentives? How will they react? And I think this is a further issue, perhaps, which Ignacio might want to address in his Unruhrstand. Thank you very much. It's a great honor to be here. And thank you, Ignacio, for bringing me to a place that feels very much like home. The countless times that I came to this room to participate in seminars and speeches, conferences, this was the ECB for many of us. And it reminds us of how small it started and not so long ago and how far it's gone. And the same is, of course, true for you, Ignacio. You have been not only somebody on the way of the ECB, but very much also making the way of the ECB. So it's a great opportunity to reflect on these difficult political times in which we are in Europe, to reflect based on a paper that Guido and Alberto have given us, which actually gives us a lot of reason for optimism. At least that's the way I would put it. And this is also the way I would interpret the results. I have four points that I want to make, which are in the broader picture of what they are raising here. One is related to the typical way that we look at optimal currency area theories and how much damage that actually does to our thinking. Then I want to look at one optimal currency area that is probably also not an optimal one, but it's the US and how, what are the lessons that we can draw from its formation. And then two brief comments about the reasons behind the disunity and polarization that we are observing and the possible role that the demography may be playing in trust. So first of all, confession. Yes, I also teach optimal currency area theory. And when you approach a course of European monetary integration, that is the framework that you kind of are maybe not stuck with, but that you start from. But I also, the confession is I don't like it. And one of the reasons I don't like it is because I think there is a fundamental problem with it. And in fact, this is in a way what Stabilinia and Alessina are showing us here. There is an assumption behind it that the unit of account that we should be looking at, and that's of course the assumption shared in most of macro, is the country. That the country is actually something homogeneous, both in terms of its economic qualities. It gets shocked, so it doesn't get shocked. It's the I versus the Y that we look at. It has preferences. And they differ from the preferences in other countries. And then we can start analyzing. And on many of the dimensions, both in the benefit area or in the economic side of things, the country may not be the right unit of analysis. Asymmetric shocks don't necessarily occur at country level. They may be at regional level. They may be at industrial level. Moreover, these things are not static over time. As economic integration happens, as we know from agglomeration and other effects, this may very much change. And again, the country level may be the wrong one to be analyzing. Then what we do is we say, OK, so optimal currency area, Europe, whenever you do this analysis, you conclude, oh, the euro is not the optimal currency area. So one of the things to look at then, what cures it, how much mobility do you have? But one of the aspects is also always, is it are we too different? Are the preferences too different? And again, the assumption is that preferences are somehow formed at the level of the country that national identity is equal to national preferences. And you show that that's wrong. That's not Europe. That's, by the way, also not the US. So this is actually the actual summary from one of my slides. Yes, the euro, monetary union, is not an optimal currency area. But no other one that is existing today is an optimal one either. So maybe the point here is maybe we have to think of different frameworks of how we approach because we all are the slaves of defunct economists. And here very much, in some kinds, living economists. And here very much, you know, Mandel is sort of having a strong influence on the way that we think about costs and benefits of the euro. So if we go to the US for a second, and I want to go more historically using a, some results from a very recent study, that recent report that Kierkegaard and Posen have put forward, and that are very interesting because they essentially show that not only the US is maybe not an optimal currency area today, but certainly it also was a very hard process of integration and federation making. So institution building at the federal level took various attempts. And the various repeated attempts, fiscal integration in the US took a century essentially in the making. And very importantly, which I picked up here, and that resonates very much with us today, is that whenever there were steps towards centralization, this can very easily unite the opposition. So one of the quotes here is such negative coalitions that are fighting against centralization are very easy to form and maybe quite durable and easier to maintain than positive coalitions, which are arguing essentially for the need for a common good. And moreover, also something that resonates is that also in the forming of a union in the US, crisis played quite a big role. Moreover, security crisis seemed to have played an even larger role than economic crisis, which I found was quite interesting. And institutions built in the course of managing such crisis usually endured. They may have had some modification later on, but they usually endured. So in a way, again, I think this is a way of looking at the US experience that gives course for some optimism. And now it seems that the rest of my slides has gone missing because I had a few more. So let me talk without them. So the next point I was going to make is about the disunion in the role of culture and what is the role of culture versus economics. So we know because a lot of the polarization and a lot of the research that we have recently been seeing is that the financial crisis plays a big role generally for polarizing societies. So this is a general pattern that is also confirmed in other countries and in emerging markets again and again. So that would be something where we can say, well, if it's the financial crisis and if it's the polarization following from the suffering of the financial crisis, the unemployment, et cetera, this will eventually correct back. So this is not a permanent effect. But on the other hand, if it is actually value-based culture and identity, which is driving our societies apart within countries and across, and maybe those things are more immutable, maybe those problems are deeper and therefore that would be more of a cause for pessimism. So I think one of the questions that we really have to take very seriously is this identity, is this question of who are we when we say we as Europeans? Who is the people? In Nazi, you mentioned the will of the people that is so often cited these days. Who is this people? Is it the 51 that voted on a certain referendum? You saw the Swiss map, the Swiss Switzerland not being part of the analysis, unfortunately. But in Switzerland, we actually have a lot of experience with voting and referendum and we do this on a regular basis. And the question who is the majority, who decides is very, very closely regulated because it is always a qualified in a way a supermajority. There is a process also that makes sure that when a proposal is put forward, when a proposal is put forward that the government can actually make an alternative proposal. So we cannot be defined simply by the question, you have a plebiscite and the 50 plus one person decides and that is then by definition the people. We have to really clearly go against this kind of trend that is being used by populists. Last point, I'll be very brief here. I had a few slides that are a few graphs that are quite interesting. The point is from this kind of value service and from this kind of service about who do you trust national versus European institutions, what you do see is also a very interesting age cohort pattern and that's something that I find worrying. If I interpret it pessimistically, the result is that all the generations are becoming more nationalists that trust the European institutions less. Now, unfortunately these ones, that's the growing cohort. So the median voter is aging and aging doesn't seem to be leading to more tolerance and more broadening of identities on average. Whereas on the other side, the young people in this service are becoming much more European and rather fast. So my last point, my last slide, was actually La Rue de la Loire on Paris inundated with the young people who are saying, this is my future, this is our planet, save it, and you guys are responsible. I think that is actually our responsibility. Thank you very much. Thank you to all our speakers. I have a couple of questions which I'd like to ask before opening up to the floor and I think the first one is for Professor Tabellini more directly and it's a curiosity about his paper. I mean, you look at a number, cultural preferences on a number of areas. I was wondering whether perhaps if you restrict the field to just economic preferences and I'm thinking about, for example, the attitude towards government spending, there could be more heterogeneity between countries than within countries and whether that could be a constraining factor for the things that many of us in these rooms are concerned about. And the other question is whether maybe the problem is not so much heterogeneity between countries but it's between voters and governments. I mean, maybe the European Union has been pushing an agenda, which is different from what the voters wanted and I'm thinking one example is, you know, what you're seeing today about the signal market. One idea at the core of the EU has been the idea of the single market but now you're starting to see a pushback from some governments in the direction of less competition policy. I'm thinking of what's happening from the French government and the German government about Alston Siemens but also other cases. So I'm wondering whether here there is some disconnect between the agenda which Europe has been pushing forward and what people wanted. And then I have a question for Professor Vedder and Daniel Gross. I mean, one message from this panel seems to be that actually more integration is possible and you actually said it's desirable and actually Professor Tabeline even said institutions may be the way forward as opposed to intergovernmental bargains. Troubles we're seeing exactly the opposite at the moment. We're seeing more intergovernmental decisions and we are seeing possible integration reaching a limit on some areas like the completion of banking union, perhaps, you know, moves towards a fiscal union. So I'm just saying if it's true that more integration is possible, how can we make it happen given the current political constraints? So on the two questions you asked me we didn't try government spending in particular but if we repeat the analysis that I illustrated for the set of questions that concern the role of the state and they have also questions about distribution and economy, the results are very similar. So essentially this is due to the fact that there is a very large amount of heterogeneity within country, within any country. So we differ in our perspective as Italians and Germans towards the role of the state but these differences are minute compared to the differences that we see within countries. On the second question, I think you are right, there is a gap between voters opinion, aggregate voter or average voters opinions and the stance of European policymaking. In a sense what I would argue is this is because we are not a political union, we don't have political institutions that somehow manage to influence the policymaking at the European level. So it's not surprising that the European vision is less responsive to what the citizens are saying because it's filtered by bargaining at the European council. And so that's something that of course reflects the importance of the, the secondary importance of the European Parliament and the way in which institutions are designed but it's not necessarily an immutable fact of European integration. And I think that the challenge that we face inside our own countries and in the Eurozone in all advanced democracies is probably the fact that modernization, globalization technology is creating winners and losers and is creating new cleavages in society. And we inside our countries and inside the European Union we have not yet found a way to cope with these new cleavages that are going to get worse. The agglomeration economies, the benefits of the people who are more integrated and more educated will continue to grow relative to those that are left behind and that's a huge challenge for Europe and for any advanced democracies and I don't think we have found a way to cope with this. Well, in terms of the, let me comment mainly on the question whether there are certain areas where the European discourse may have been particularly challenged and possibly deteriorating and one obvious one which also concerns us very much in this room is the question, since the Euro crisis how countries and how different societies and politicians have been analyzing the causes and discussing the culprits. This is obviously a very, very divisive, has been a very divisive debate and it's gotten worse, not better. I really think, looking at Germany where we are sitting right now, I really think today a majority of the population, the general population and even a majority of economists would have a very, very different analysis about the benefits and costs of the Euro than they would have had three years ago and in particular there would be a deterioration in that sense, many people have become convinced that Germany is somehow in this transfer union and for some reason it is very hard to fight this with facts and vice versa, there is of course the other side to that where countries or societies have become convinced that they have been cheated. So you have clearly some issues where right now we have a situation that is much worse than it was a few years ago and I think it's partly also really the fault of the elite that there has not been a European, sufficiently European understanding and emphasis on the common good. When you ask why do we need European institutions rather than intergovernmental solutions then it's usually because you have a common good problem to solve and I think many people don't think about Europe in terms of the common good, they think about Europe in terms of bureaucrats that want power or something like that, it's again in a way the phrasing, the framing of how we are discussing Europe and the Euro has not been very productive to put it very mildly and we have to think very quickly on how to change that. Daniel, on the way forwards and whether we've reached the limits. And your question whether we have more intergovernmental decisions, I disagree. I mean, especially if you think, let's say 10 years back and today we are sitting here, right? A giant step in back supervision but there are also other areas, think about the public prosecutor, very beginning and also even backing supervision as a long tail which comes behind that. Front-ex, right? Little bit of common decision making. So I totally disagree that things are getting worse and worse. On the contrary, we have more and more areas where states as you showed Beatriz, as in the US under crisis and under big resistance, right? Have actually agreed among member states and countries that okay, yes, either A doses of federal institutions or A federal institution is necessary and this is very important that in terms of supervision it is now accepted and there's no complaints from the industry. I would be worried if now the German banks, Italian banks and the French said, oh, it was so much better in the good old times and they're not saying that and that's very important. So I disagree with the fact that that analysis, second point is now forward. Because of this divergence in the institutions, I think actually it is true that the intergovernmental method as such becomes less efficient. If you have six very similar countries, you get together, let's say you have a directive, right, to say in precise legal terms, you can assume that it will be transposed more or less in the same way, comma and then actually applied by national traditional systems in a similar way, right? That among the 27 and with X number of them sliding backwards, you cannot longer do. So I would say we have had more federal institutions, more federal institution making also, but the need, so the demand curve so to speak has also shifted. We need it even more because of this divergence institutional quality. If I may add one thought on this general issue of what can we do? If my analysis is correct that one big problem we will confront is that nationalism is a reaction to being left behind in this world which is becoming more integrated and more globalized. Maybe we should change one important way in which we have been thinking about the European integration. So the economic approach to European integration has been let's make the single market work, let's integrate markets, and let's do it in a way that induces competition between systems to make them more efficient, tax competition and other forms of competition between systems. This has made it more difficult for member states to redistribute in favor of those who are left behind, but there is no reason why European integration should take this form. European integration could also take the form of empowering the redistributive policies of member states, making it easier to tax the wealthy, making it easier to tax capital, making it easier to tax corporate capital. This may be inefficient, we all understand this, but there have to be trade-off and if we need to help those who are left behind we also need to worry about the fact that the share of labor income in GDP has been falling, the share of capital income has been rising and that maybe we need the help of the European Union to achieve the redistribution that would be needed. It's not a distribution across member states, but of course it would need to interfere with the capacity of member states to compete to attract tax capital or wealth. And seeing the European Union as an instrument for empowering redistributive policies I think can be one reaction to these nationalist tendencies. Okay, we have time for I think a couple of questions. I won't take more than three and I've already identified the three, so I am. And I mean, I think Ignacio is allowed the question as well. So I'll take one, two and three and Ignacio is the last one, yeah. I'm Rosa Lastra and first I would like to thank Ignacio for a wonderful presentation and also for quoting my work. My question relates to the independence which is also something that has been discussed with the panel and that is that independence is in the conduct of supervision or banking supervision is instrumental in the same way as independence in the conduct of monetary policies instrumental. It's an instrument in the pursuit of a goal in the case of central banking monetary policy used to be prices stability which was easily defined and quantifiable. Independence in the conduct of banking supervision is also instrumental. The problem is that the goal which is financial stability is not as easily defined and also it coexist with other goals. And also that independence in supervision is not the same as independence in monetary policy because at the end of the supervisory cycle there is always the possibility of crisis and with crisis comes at the end of the spectrum the possibility of bank recapitalization with the involvement of the government. So this complicates the conduct of supervision and I would like to hear from the panel and then later perhaps from Ignacio about this instrumental nature. You have also been talking about the independence of the judiciary and that's I think a very important element because that's part of the accountability that central banks have both with regard to monetary policy and supervision and independence of the judiciary is not an instrument it's actually a principle is a constitutive part of the rule of law and therefore we need to protect it and to take care of that. And that's perhaps something which I would like to I would also like to hear from the panel. And then finally a methodological point I would like also to give thanks to Ignacio for mentioning the law and the legal literature. I think we need to have a better interdisciplinary dialogue when we talk about supervision and financial stability between law and economies because otherwise we will end up with bad laws or bad policies. At the front. Professor, yeah. Well I have a broad question but it was a broad paper and a broad panel in general and a broad conference. This extraordinary finding of that Guido presented suggests nations are not about preferences they're not made of preferences not even endogenous preferences they're made of institutions. So the next question is can we separate out the rule of political institution from the role of economic institutions in this regard? Ben Friedman, Harvard University I have both one observation and then a question for Guido. The observation is that at least based on our evidence in the US the kind of cultural and political attitudes that you are examining turned out to be very, very durable over time which is discouraging from the perspective of thinking that we can change them through things like economic success or policy. Just one example, the areas of New York state that either supported or resisted ratification of our Constitution in 1788 are almost identical to the areas of New York state that voted for either Hillary Clinton or Donald Trump in 2016. No matter how much you studied the history and the electoral results if I showed you the two maps if I showed myself the two maps I could not tell the two maps apart. Now this is very discouraging from the perspective of hoping to correct these situations. Second question, you mentioned that your work drew on questions in the value survey about religiosity. I'm wondering about the role of religion as opposed to religiosity. Again, the motivation is that results for the US indicate that the kinds of attitudes and preferences that we're discussing here, things like attitudes toward government, attitudes toward modernization, attitudes toward integration and so forth are very heavily correlated not with religiosity but with the religion. Oh, and for example in Alberto Elizina's latest paper with Stephanie Stencheva, there's this nice map of the United States with various differences and attitudes. It turns out to be almost indistinguishable from a map of the United States showing the prevalence of Protestant evangelical denominations. And so I'm wondering whether here in Europe where you have almost as much religious heterogeneity as we do, whether you've investigated that and if so, what the results show? Dulci sin fundo. Well, harmonizing religion seems to be difficult so, no, I wanted to ask, I mean there are two big drivers seems to me of many of the phenomena that you have analyzed and one is insecurity. Personal insecurity, economic job insecurity and financial insecurity also as a result of crisis, et cetera. And the other one is perception. So the extent to which perceptions and information tend to diverge from reality? And I was wondering whether you had some thoughts to offer on the extent to which these two things can explain some of the phenomena also because both of them more or less came up in the last 15, 20 years or at least they were aggravated significantly in the last 20 years. And that's where we see some of the anti-Europe and the we first attitudes emerging. So there is a certain simultaneity and also I think if indeed these two elements are important then already to some extent the policy agenda would emerge because insecurity, ways of promoting risk sharing through public intervention or even financial education and insurance education which is not very well advanced in many European countries could help from this point of view. And as far as perceptions are concerned, of course, the truth is a public good but governments are not often engaged primarily or directly in promoting the truth and giving the right information. So that could be something that I think that's important because for example, security is a sense of people more secure tend to be more open towards others in general, both I think within countries and across countries. And so if these two drivers are indeed important at least we know what we are supposed to do. Okay, why don't you answer the last three questions because I think they were directly directed at the paper and perhaps you can comment on Professor Lastra's questions. So let me start with Ignatius, forgive me if I refer to another paper of mine but I think what you were suggesting is very, very interesting and I've been working on this issue with Nicola Genaioli. So there is a lot of evidence in other work for instance the work by Luigi Guizzo with quotas of what you said that economic insecurity is correlated with nationalism and with voting for right wing parties. There is evidence that regions more exposed to competition from China are also behaving in that way. So I think it is a solid fact that economic insecurity is correlated with this phenomenon. So one idea that we are exploring is to think about the fact that these shocks are correlated with identification with social groups. So let me see if I can explain this in two minutes. So there is a large literature in social psychology that suggests that your beliefs and your view of the world is affected by the social identity that you have with the groups with which you identify and the parties with which you identify and there is a lot of evidence that beliefs about policy issues are affected by whether you are a Republican or a Democrat, you are a left winger or a right winger. Positive facts about climate change, about the consequences of policy intervention. So one idea which I think is worth exploring is that these economic insecurities and these shocks are changing your political identities and your social identities. You used to identify with the left or with the right and this was associated with specific belief distortions that you were a beneficiary of specific types of redistribution. And now new economic shocks are making you change your identity and you identify with your region, with your nation, with a social group that differs in other ways and this changes your belief distortions. You no longer stereotype on the left versus right dimension. You stereotype on being in favor or against immigrants, in favor or against globalization. And so I very much share your view that economic shocks matter because they change your beliefs in this particular way in changing the political group or the social group with which you feel a part of and creating new cleavages and so this may amplify political conflict and change the political consequences of economic shock. So I think that's something that I find very interesting. On the other two questions I have less to say because I agree with Ben that the content of religion also matters. Of course, this is incorporated in our data because we look at differences across countries so I don't think it would change the message of the analysis but I agree that that's an important cleavage and correlated with many aspects of our beliefs. And you are right that there is a surprising degree of durability in these attitudes although the pictures that I had shown also shows that the attitudes towards Europe are affected by economic events and what I was saying in response to Ignacio's comment is one mechanism in which you may change your beliefs and attitudes if you change your social identities. With regard to the point made by Jean I perhaps would not agree with your statement that countries only differ by institutions. I think national identities are a cultural feature that are very important. I think countries differ because the citizens feel that they belong to a particular community which is defined by history, by language. This community does not influence their view about what policy should be or what government should be doing but it influences their willingness to redistribute to compromise and to accept collective decisions. So there is more than just institutions. There is a tradition associated with national identities which is very important and ought to be changing. On whether institutions differ we understand that political institutions are very different. I'm not sure that national institutions in Europe are so different. The broad features of our labor markets and the way in which the economy is organized are not so different I would argue but you may dispute this. Thank you. Quick comment to the question on the importance of the judiciary and judicial institutions. Well that's what I emphasized so I fully agree. As I said in Europe we have the additional dimension between the national and the European part of it. And part of what the European supervisors do is regulated by and also judged by a European institution but other parts then actual actions on a Spanish bank then is judged in Spanish courts and then you are thrown back also to the quality of the national league institutions. And that's why I'm saying in Europe we cannot look at the institutions we have at the central level independently of the quality of the institutions at the national level and their deterioration poses a grave danger. Well I would approach it by saying that independence in the case of supervision is of course more difficult to define and has more aspects than for monetary policy and essentially because for monetary policy you can say independence for what. And so the what that you are defining the goal can be measured in real time all the time. You can define it very precisely inflation at X percent. Whereas the other way of looking at the independence is to say from what. And here I think it's the more relevant one. It's the independence from specific special interests. That's essentially what you're trying to secure through the supervision making supervision not local. And in a very similar way I think the way to think about this is for competition policy. That's also why independent competition policy is equally important in order to secure independence from special interest. And this is not only industry and companies this also refers increasingly in the age of Trump to nations because increasingly there has been almost an acceptance I feel that there are such things as national interests that are different from the interests of the other nation. My champion versus the other champion type story which is very much based on the notion of the deal. And in many ways is contrary to enlightened self interest. But the more this takes hold the more people think in terms that my national interest is different from the national interest of the other country. The more you actually need international institutions to secure that the rules of the game are the same for countries. Well we've taken 10 minutes of your coffee break so I think we should really stop here but please join me in thanking our panelists for a really fascinating lecture.