 I'm not sure about the German. You know, I usually like to characterize myself more as a European than a German. And you'll understand why when we come through this talk. The topic of my presentation today is completing the Euro. And it's that topic which has been around for quite a long time. For we're now in year number six of that crisis. It started in the spring of 2010. And what I will try to argue is we're still far from having found the solution. But let me just start out by telling you what you see here. This is the European Central Bank in Frankfurt in construction. And I think it's a very nice metaphor. But you mentioned that I worked at the European Central Bank. And in fact, in January, on 2nd of January 2002, I was sitting in that office where you see the red arrow. Working for the ECB. And that morning, the ECB president, Wim Doisenberg, walked into my office. And he didn't do that every day. I was not that important. But it was right after the change over to the Euro area coins and bank notes. And so Wim Doisenberg, as a good president, walked into every office to thank the staff for the efforts. I hadn't done anything particular. But it was just a way to thank everyone. And so he walked into the office, looked at me, and said, you look young, which at the time was still the case. And then looked at me and said, but you know, the Euro will live longer than you will. And then he left the office. I thought that was very nice at that time, man thinks about a historic legacy. But I must admit that during the past five years, I had serious concerns about my health. Because the Euro, well, if this word is right, then I should still be worried, which is why I would like to discuss and which is why I work so much on how to complete the Euro and allow it to stay alive. What I would like to start with is just very quickly taking stock and then walk you through the crisis, what needs to be done, and give you some specific proposals on how to complete the Euro. Today, the situation, as you can see here, is actually quite straightforward to me. The Euro is not viable in the long run if it doesn't change. And this is a message many people, I think, don't say that bluntly, even if in Berlin, in Paris, in Brussels when I talk to people, I get the impression most people now share it. So we need to complete EMU. But the political and economic contexts are still not in a position or in a state where it's easy to do fundamental reforms. The Euro area GDP levels are still not back to the 2008 levels. So we are looking at a lost decade, not only in this country, but in many, many other countries and in the Euro area average. We see crisis and reform fatigue. And we actually have those three interacting dangers which you see here. We have high debt levels. We have a reform gap and actually lack of motivation to do reforms, and there is waning EU legitimacy. And so if you look at this that way, we're still, we're clearly not out of the woods. We are in a very difficult situation. Sometimes like to say, when you are with a ship in a storm and the storm almost destroys your ship and you manage through quick fixes, ad hoc things to prevent it from sinking, the first thing you do when the storm is over is seek a safe harbor place, review the ship before you continue. This is not what we do in Europe. We actually continue to sail and say, we'll also manage to get through the next storm. And I have serious doubts this is going to happen. Let me introduce this by first going back to the crisis, give you my quick read on what the crisis was, how it emerged, and then talk about the fundamental difficulties with the euro area and some concrete reform proposals. The first thing about this crisis is I like to start with the ECBs one size fits none problem. And it's something I think many people in Ireland understand much better than people in other countries. What do I talk about? When you set a single interest rate for a monetary union, you have to take into account the averages of all euro area member states. So if we split this room into two and you say you have zero inflation and you have 4% of inflation, the ECB will do as if the entire euro area had an inflation rate of 2%, the average. And the obvious problem is that this type of monetary policy is wrong for both sides. And if I say for a second that the zero inflation area is Germany and the 4% inflation region is Ireland, which was the case during the first decade of EMU, then the ECB, through its one size fits none policy, actually brought Germany deeper down into a recession. Many people have forgotten today. Germany was actually the sick man of the euro as the economists wrote and was going into a deep recession in the early 2000s, whereas Ireland and Spain were in that famous bubble. And it was impossible for the ECB to actually do good for those two countries. And this greatly contributed to imbalances arising in the euro area for various reasons. Well, initially we had those booms and they were actually followed by financial flows because if you wanted to make money on the German side, you put your money into real estate in Dublin or construction in Spain or bank stocks in Ireland. And I'll come back to this in a second. And so these imbalances instead of actually disappearing got bigger and bigger and bigger in economic and monetary union and the ECB did the right monetary policy for a country that did not exist. One size fits none. And thus this is to some extent the original sin. And the question is why could that happen in the euro area? It could only happen because Ireland and Germany are totally disconnected countries. The single market does not work the way it should work. If we have the same problem in the US between Michigan and Texas, we have labor mobility. There's single budget. There's a single unemployment insurance. There are flows going from one to the other country. There's a single financial market. But none of this is present in the euro area, which is why those two blocks could move apart rather than moving together. And economists call this the weak real exchange rate channel. So the pricing did not take place in the right way. And instead of getting those two blocks to move together, they actually were moving apart. And fiscal policy contributed to that. Governments behaved as if the euro area didn't exist. Ireland got that famous blue letter from the European Commission in 2001 and put it very quickly into the trash bin. And Germany, on the other hand, couldn't do anything to stabilize its business cycle. And what you see here is that this effect is actually very easily seen through unit labor cost divergence. And this is exactly what I just described. The yellow line is Ireland. The orange line is Germany. And look at 2007. Wage unit labor costs in Germany had stayed since 1999 at the level of 100. Whereas in Ireland, there were up to 137. So a 37, if you think in terms of exchange rates, this is like a 37% increase of the exchange rate making Ireland less competitive. And what has happened since then is obviously some kind of correction. But in Germany, in particular, has started to go up in terms of unit labor costs. But we still see a significant discrepancy here, and the euro area is still not an integrated economic space. What we did at the Jacques de Loi Institute together with the foundation is we looked at convergence indicators. And I myself was very surprised when I first saw this chart here. We developed an indicator measuring convergence in the euro area and went back to 1970. And you can see that in the early days of the European Union or until the 1980s, there was really no convergence. But then with a single market and with a Maastricht treaty, a convergence process set in both in terms of cyclical convergence but also in terms of nominal convergence and even some real convergence. But since the euro got introduced in 1999, we have actually given away a lot of that convergence and divergence is the new development which we see in that European Union. And that's obviously a reason to be concerned. And I like to ask, so what could we have done in order to prevent that? And there are not that many options. But the options were actually all not very attractive. We could have deepened the single market in order not even to allow those wage differentials to appear. If all goods are traded in the euro area, then a price difference immediately translates into all countries buying now from Germany and no longer from Ireland. But those long term differentials wouldn't develop. But politicians, as we know, were not very happy in deepening the single market because of the services directive, et cetera, protecting domestic workers so that the single market was not completed. We could have used national policies to stabilize. So we could have asked Ireland in the boom period to actually not run or to run an even larger surplus, to put more money aside to face the next crisis and we should have allowed Germany to go even more deeply into fiscal expansion through deficits. But this type of EU control is something none of the politicians wanted to hear. I mentioned the blue letter earlier on. The third option would have been we could have rebalanced through some kind of redistribution. Interestingly, in the boom period, Ireland would have had to wire money to Germany in that period and Germany would have had to wire money back to Ireland in the crisis times. I'll come back to this. It sounds like a silly proposal. In fact, it is not. If we share the single unemployment insurance, this is exactly the type of result we would get. But nothing happened and the crisis was the result. We saw the collapse of the boom countries of the banking systems, even those with low debt. And we saw the reverse of the capital flows, nothing I need to explain in this country. And we had this self-fulfilling fiscal crisis with markets betting against those countries which were already in trouble. What's very important as a German for me to say is this crisis is not a debt crisis. This is the narrative my chancellor, Angela Merkel, I agree with many things she says on that point, I tend to disagree. This crisis was not a debt crisis because Ireland never broke the stability and growth pack. Germany did. Spain never violated the stability and growth pack but France did. And so this is not about debt. It's really about those discrepancies, this heterogeneity, these divergences in the Euro area. The political challenges we face is that political integration that is required to build what I've just said, more control, more transfers, a common agreement is right now very unlikely to take place. We don't have this common national identity. We don't have a common culture. Some people outside Europe, the Chinese, the Americans look at us and say, well you do have a common culture. Come on, I mean you are an integrated continent. You say you're different. Look at Texas and Vermont, they're so different. This is not much bigger in Europe. So there could be some common culture. But it's clear that the question, whether we in Europe are ready for larger transfers, permanent transfers, a larger common budget, the EU budget is 1% of GDP, more transfers of sovereignty to the EU level and some competition across countries, tax competition, something I like to say here. That's something many politicians, many populations don't want to hear. And so Timothy Garten-Esch has this very nice quote I like to read out, which is, it is precisely the forced march to unity across the bridge too far of monetary union that is threatening the very achievement it is supposed to complete. And so this is the British view to say, once we go into the single currency, this is the step too far, and since we don't have this political integration, it's not going to work. If I stopped my presentation here, we'd all leave the room and say, you know, let's grab the Euro. Why haven't? And I find this a very, obviously, not only for my health, but in general a very unpleasant type of conclusion. And I think we can fix this. But we need to be very systematic and this is what I would like to propose next. I like to think about the economic and monetary union in terms of this trilemma which you see here. And a trilemma has always these characteristics that you can only combine two of those three elements together. And what you see here is that the three objectives we would like to combine is, we want national or we want economic policies to be run at the national level. This is what I said before. We don't want to get a direct order from the European level or Brussels. At the same time, we want to avoid moral hazard which is giving transfer money or giving bailouts to countries without controlling what they do with that money. And also we would like stability in the Euro area. So we want to prevent crisis and not have this type of heterogeneity I described before. All three together would be the ideal world, not only for Germans, but basically for everyone in the Euro area. The problem is it's very hard to combine the two. Why? Well, if we combine national conduct, national conduct of economic policies with normal hazard, so we decide we don't bail out any country. We actually leave those countries alone. There is no transfer mechanism, no unemployment insurance, whatever. Then the result is what I described before. We run into a crisis because of these divergences and it happened once it will happen again. The other way to solve this then would be to say, well, let's have the national conduct of economic policies, but let's prevent those crisis through transfers. But if we give those transfers then without asking for a direct counterpart in what should happen in those countries, we would be in what is called in German very often and you've heard that word, the transfer union where we simply give money away without anything in exchange or any control mechanism. And that's the moral hazard world, Wolfgang Schäuble and some people in Berlin and believe me, I know that city. This is the worst world they can think of and you know this. The third option is to say, well, if we don't want moral hazard and we don't want crisis, then we actually need a full-fledged federal system, but then we have to abandon the conduct of national economic policies. And in fact, when you look at what happened in the Eurora crisis, the crisis countries were asking for the transfer union, just give us money and leave us alone, okay? Germany was asking for, well, in fact this here, or Germany was initially asking for this here, but then for this here saying, well, we give you money, but then you give away sovereignty and we dictate to you what you should do with the money we give to you, which is to a large extent what happened through the MOUs. And the question now is, how do we solve this dilemma? Sorry, I'm clicking in the wrong direction. To me, the concept which is best or most useful in order to think about this is something like, I like to call, and Jack DeLau and I wrote a paper on this, federalism by exception. So, in general, we should be in a world in which we have the national conduct of economic policies and no moral hazard, but when the going gets tough and we run into a crisis, the European Union should jump in and we develop this type of federalism by exception to a large extent through the MOUs and in that crisis, but in a very ad hoc, non-democratic, non-controlled fashion, and this is where the euro area needs to make progress. I think we don't need the EU super state. We don't need those United States of Europe some people like to talk about, because it's actually perceived more as a threat than as a solution. What we need is as much additional integration as strictly necessary for the euro, but as little as possible. We don't need more than that. And this follows this principle of subsidiarity and I like to say we need some additional risk sharing. This is where Germany has to cross the line and we need some additional sovereignty sharing. This is in particular where France has to cross the line and so in normal times we preserve national sovereignty and in crisis times we move to a stronger Europe. Now you will ask, how does this look concretely? You know, this is all very nice, nice concepts. What specifically would I do? I see five building blocks for EMU reform and we can put them together on the basis of some crisis prevention. So the prepare part and a repair part where we fix something that goes wrong in a crisis and the five building blocks are, we need to work on convergence to allow the euro area to be a much more integrated economic space. We need to work on this real exchange rate channel. We need some cyclical stabilization, the concept I referred to before. We need to work on the ESM or a European monetary fund and we need to complete backing union. And let me just walk through those proposals quickly and then come to a conclusion. The first proposal is we need to do more for convergence. It's impossible to have that economic and monetary union with those very differentiated economic spaces. And as I showed to you before, the euro area was extremely bad in bringing about this type of convergence. Instead we created divergence, which is part of the reasons. And so we need to work more clearly on objectives to get countries closer together. And I would suggest instead of focusing on debt or deficit, which are important, but which are already part of the treaties, we need to take into account inflation differential, the external balance and unit labor costs in order to get those countries much closer together. But that implies that every government has to take those into account. I would want the European union instead of focusing on the Maastricht criteria deficit. We all know the deficit criterion of 3%. It's one of those prominent numbers. Somehow everyone got in their minds, but we don't know about inflation differentials or unit labor cost differentials. And I think that's almost more important than some of the other factors. Proposal number two, and it's related, we really need to complete the single market. Now I'm very happy to say this here, because I think it's also an area where the left and the political right, very often the left is more for risk sharing and the political right is more in favor of certain pro-market things. I think this is something everyone should be able to agree upon. That's actually a company, a monetary integration with a much deeper economic integration across Europe. The services industry, which makes up 70% of your area production, is only to 20% cross-border. So it's an area in which we actually have national economies. And you cannot have a hairdresser operating cross-border, but so many areas from consultancy over accounting, Ireland is actually relatively good in that because a lot of your service industries are present in the rest of Europe. But still, it's only to a very limited extent cross-border. We need to make mobility of workers a key objective of the European Union. It's very hard to transport your pension rights across borders. And again, it's a problem Ireland knows very well. You attracted a lot of foreign European workers and they come back and see they cannot take their pension rights from Ireland back to Germany. This is not what should happen in an integrated economic space. We need to make labor mobility an objective of the employment agencies. And in general, I think we structural reforms to make wage and price adjustment much easier to allow the single market to happen. And obviously there is a very strong nexus between the proper functioning of the single market and the proper functioning of the Euro. I'll be quicker on this one. We can discuss this later on. I also think we need some kind of, cyclical adjustment mechanism, perhaps unemployment insurance for the European Union. Why? Well, as I said before, if everyone is employed in one area of Europe, let's say Ireland in 2006, 2007, full employment, and there was very high unemployment in Germany, if those two countries share a common unemployment insurance or a mechanism where one country pays in and the other country can take money out, then this rebalances the system, the surplus problem of this country here could have been addressed in a much easier way had such a scheme been in place. And on the opposite side, Germany would have a much easier time today putting money into the crisis countries, acknowledging or knowing that there was money flowing the other direction before. And that's something which works in the US. Michigan and Texas share this common unemployment insurance and Texas in one period pays in and the other countries pays out. I actually calculated this for Germany and I don't have time to go into the details here, but the take home message is, Germany would have received money in the bad years and would be a net contributor in recent years. But if you do an estimate over a 15 year time period, the net balance for Germany on such a scheme would have been exact zero, showing that it's not a permanent transfer, but it's just a give and take in a currency union we should have, every currency union has, but the European Union doesn't have. And whether it's an unemployment insurance on which I'm slightly more hesitant or something I call a cyclical shock insurance is something that can be discussed. I'm happy to go into more details later on. I'll skip a slide just to move on. And then the fourth proposal is, I think we need to do more work on the European stability mechanism and the way we actually do fiscal surveillance in the European Union. Right now, this is all done ad hoc without direct parliamentary control, and you know what I'm talking about. The Troika is an institution without a face. The Troika is an institution without parliamentary control. The Troika did not benefit from a strong legitimacy but was largely a technocratic body. And I think that's not right. I share the principle on which the Troika is based, which is there should be assistance against conditionality to avoid moral hazard. That's a principle which is very important, but we actually need a much more subtle and structured way for crisis countries to get access to this money. There is a proposal which you can read, which I'm not going to go into in detail, which I have developed in which we argued with colleagues, you know, the first tranches of financial assistance should come without any conditionality because you might need them on a very short-term basis in a crisis moment. But when you then get more and more dependent on bailout money from the European level, there should be a step-wise transfer of sovereignty to the European levels so that every country knows ex ante in advance what's going to happen with sovereignty when you become addicted to European support. And this is the big difference in my view between Ireland and Greece, also between Spain and Greece. I think some countries cooperated very early on and the conditions in the MOUs were probably too strict and other countries didn't cooperate at all. And there we could argue that the conditions in the MOUs were probably not sufficiently strict. But this is not the way the ESM system works. And I think the reason the ESM system doesn't work that way is because it's not a political institution. We need politics to come back into the system. And so I think this idea of having a European finance minister, a double-hat finance minister who will be part of the European Commission in charge of the Euro and at the same time cheer the Eurogroup and become the face of the Troika or the institutions that they're now called would be the right way to fix this. Why is it not done? Because national finance ministers don't want to abandon their political power base. And we've seen the role of Kathleen Ashton as the high representative in foreign and security policies. You don't put the strongest person there. But I think this is really something that needs to happen. The moment this was most striking is last summer when there was the negotiation between Greece and Germany. In the last hours of that night, the only people negotiating were Angela Merkel and Alexis Tsipras. There was no European representative at that table. And this is not how the European Union should function. There should be the honest broker in the middle and say, you Germans have a legitimate interest, you Greeks have a legitimate interest, but there's also the legitimate interest of the entire European Union. And if Greece leaves, Irish spreads will shoot up tomorrow morning. And this is something I, as the European representative, have to defend. And we lack that person. If you want a proposal, again, I'm not going to go into this debt proposal. We developed at the Jacques Deloitte Institute in Berlin a description on how this position could be, could look. We actually propose a joint control by the European Parliament and national parliaments. It's probably, I'm not going to go into this graph right now, I should come to the conclusion, we can come back to the Q&A. But if you want to read a detailed proposal on what the European Finance Minister should do, there is a paper out there describing that. Perhaps just in two words, I think the three functions of the Finance Minister should be, there should be a small European investment budget that person should supervise, economic and fiscal policy coordination, and then also chair the European Monetary Fund and actually become the face of the Troika. It would be a very strong political position, but we need that at the European level. If we want to make the currency union work. The fifth proposal is to finalize Banking Union. We have done a lot in that field, but a core pillar is still missing and the core pillar is the deposit insurance. We have the single supervisory mechanism. We have the single resolution mechanism. So something that happened in Ireland and this is to some extent historically not very fair because had this been in place, the Irish crisis would have been very, very different for obvious reasons because we would have a single resolution mechanism. The decisions would have been taken by the European Central Bank and not by the Irish government through the back door in negotiations with the rest of the euro area. But we need a solution for the deposits and the reason again is quite straightforward. Should the next crisis hit Europe? And it's going to come. On average, every eight years we will see a recession. So sooner rather than later and it's in particular right now, yesterday, today, financial markets start to anticipate a recession. If this comes, the question will come back, is the euro going to survive that next crisis? And if you are an Italian citizen, you ask yourself, are the 200,000 euros on my Italian bank account really safe? Because if Italy leaves the euro, then this is worth a fraction of the euro value it has right now. So why don't I just open a bank account with a German bank? There's no cost to it. Perhaps a flight to Frankfurt, but you could even do so in Rome. I just open a bank account with a German bank. There my money is safe. I can access it from everywhere. There's no cost related to that. But this is called deposit flight. And if this type of deposit flight at one point sets in, it's still a miracle. It didn't really set in in the last euro area crisis then this could destroy the euro. And this is something we're so vulnerable and there's no way to fix this. The only way to fix this is you have some kind of common deposit insurance in the euro area which tells you that an Italian euro is worth as much as a German euro. And the capital controls in Greece and Cyprus that we saw in 2012 and 2015, obviously already sparked this type of nervousness among people that at one point in time they could actually not access their money. The problem is it's actually very hard to put into place and could be very, very costly. Let me come to my summary conclusions and some kind of outlook. I think EMU today has five problems. I mentioned in the beginning, growth and employment are still too low. We're still below 2008. And the effect is that political costs of the crisis are still rising. And you face elections here and we know that all the political systems in euro area countries, in particular crisis countries have undergone massive change that was not present before. Debt is still too high, something very important as well. And the effect is that the fiscal stance you serve on the Irish fiscal council has to be either neutral or contractionary which is not good given the actual current economic circumstances. And the entire austerity movement is obviously insisting on that point. Investments in Europe are still too low. Something the Germans don't want to acknowledge. They need to invest more. We have an investment gap of 100 billion euros per year in Germany right now. There's sluggish demand. There's a reduction of potential growth because investment is not coming. And again, that's something Ireland experienced. If you go through austerity, the first thing you stop is investments. And this shows later on because you cannot catch up quickly. The single market, as I also mentioned, is not completed. And the effects are, we see divergences fragmentation. The real exchange rate channel does not work. And all this together makes the EMU right now not sustainable. We have divergences, we have fragmentation and we have that moral hazard. So we are not going to survive the next storm. What we need is an agenda and we need politicians to push that agenda. As I try to argue, I think we need more convergence. We need more risk sharing and we need more sovereignty sharing. The question is, who can deliver on that? And there I'm relatively skeptical still. Germany right now is not in a position to put forward and actually push this agenda. France certainly is not either. And both countries will face elections in 2017. So if you look at the calendar right now, we have the British referendum coming probably in May or June. We'll then have the French elections in late April, early May 2017. We then have French parliamentary elections in the summer of 2017, right after the presidential elections. We then have German government elections in September 2017, then coalition negotiations. And so we can all start to work on this again in spring 2018. This is very, very far away. If there's no crisis until then, it's easy. But if there's a crisis, it's going to get very, very difficult. Jean-Claude Juncker, I must admit I was skeptical about his appointment as European Commission Chief, but I'm actually quite impressed with the work he's done because he's actually recognizing all of this and thinks probably he's the only person out there who can push this type of debate. He published this five presidents report and in this report argued, we need to get the process right. We need to do the work now in two phases, go as far as we can in the current context until 2018 and then actually discuss treaty change and everything that's related. And a lot of what I've presented is implying treaty change. And then we can get to risk sharing and sovereignty sharing. My fear is that even Jean-Claude Juncker right now doesn't have the political backing with the refugee crisis, with the Brexit discussions to push what's possible under the current circumstances. So if you ask me at the end about my overall assessment, I'm not going to conclude with Jacques Delors, but I'm going to conclude with Jean-Monet. If you don't know what to say about European integration, use the last words of Jean-Monet's autobiography. The last words in his autobiography are, il faut continuer, continue, continue. So we have to do and continue and continue work. And since I don't want to end with just, you know, pompous note of, let me throw in this other quote by Timothy Garten Esch, who says, many Europeans are convinced that if we do not go forward toward unification, we must necessarily go backward. This view is expressed in the so-called bicycle theory of European integration. If you stop paddling, the bicycle will fall over. Actually, as everyone who rides a bicycle knows, all you have to do is put one foot back on the ground and anyway, Europe is not a bicycle. That's the exact opposite view to Jean-Monet. I think Timothy Garten Esch is right, but if you do that, then you don't reach your final destination. Thanks, sir. Thanks.