 Thank you very much for having me, and thank you for this great opportunity to talk here in the run-up to the Irish presidency. Now, we only have 15 minutes, so let me kind of give one of my first big messages up front, which is I really think if we want to make this union, this euro area really successful, we need a significant leap forward in terms of federalization of our policies. That includes a stronger federal decision-making authority, more risk sharing, and of course also the ability to square the austerity policies at a national level with some offsetting transfers from a eurozone level. Now, for all this, I think we will have to have treaty changes, I think they will be unavoidable, but also even the commission president has now talked about treaty change. Now, I think this will come and I don't see a way out of this. The question is of course when and what is the best time to do it. Now, more narrowly in my presentation, I want to kind of focus in particular on the banking union part of the current discussion. Now, when we talk about banking union, I think the idea of fiscal risk sharing is really a central one and also the idea of a greater centralization of decision-making power is absolutely central and on both lines there's a big discussion at the moment, which is a central discussion, which essentially is a discussion about federalism, but it is also a central discussion about how to make this banking union successful. Now, let me move to kind of my motivating slide here, which basically says that the problems in the banking system that we are currently observing are really at the core of the current crisis. We have a very serious fragmentation of the financial system in the euro area. Now, some people say this fragmentation has stopped since the summer thanks to the OMT policy of the ECB. Now, let me show you here a graph which gives basically the risk that is in the sovereign, in the non-financial corporate sector and in the financial corporate sector, the risk premium that corporations have to pay. Now, what you see here is obviously you do see an improvement since the summer in terms of the risk, yet the risk levels and the risk, the risk premium that corporations have to pay and the financial corporations have to pay is very, very high. Here this is Italy, the same modes for Spain. Now, let me compare this to Germany where you see that the rates are much, much lower in Germany. In other words, what we have in the euro zone at the moment, even after the policy announcements of the ECB, we have a very serious fragmentation where the conditions for financing are very different across the euro zone, which means that the same exact same corporation located on one side of the border will have very different conditions for access to credit than the same corporation on the other side of the border. And in other words, the fragmentation that we are seeing in the financial market is leading to a real economic fragmentation where basically economic activity is favorite in some parts of the area and in other parts it's really disadvantaged. And this means that basically we have starting from the sovereign bond fragmentation, the financial fragmentation, we have a serious real economic fragmentation. Now, the idea of the banking union is basically to get rid of this high correlation. So what the banking union wants to achieve is basically to reduce or to bring the correlation between sovereign risk and financial risk, so banking risk, to zero, to break the vicious circle between banks and sovereigns. So instead of having the correlation of close to one, you want to have a correlation of zero. That's the beauty of being an academic, you just say we bring down the correlation. Now, the heads of states basically say in their June summit conclusion, we affirm that it is imperative to break the vicious circle between banks and sovereigns. Now, of course, the big question is this was the decision in June, what have we achieved today? And I think we need to talk about the different elements of the banking union and understand on what fronts have we made progress or have we not made progress and how much. Now, let me first start by saying if this banking union is to be successful, it needs to be a comprehensive banking union. We cannot have a banking union that consists only of a common supervision. The banking union requires common supervision, a common resolution and a common fiscal backstop that backs up this banking union. Now, in terms of the current discussion, I would say if we have just one element and the others are not there or poorly designed, the whole thing won't work. Now, this doesn't mean we shouldn't start the discussion as we have it with the single supervisory mechanism. I think it is justified chronologically to start with the common supervision, yet it must be clear that very quickly after the common supervision, we will have and we are making the plans now on the common resolution and the common fiscal backstop. Now, doing just one is inconsistent. Just think about the ECB being the supervisor for all the banks in the Eurozone. Finding out after five years there is a big problem in a bank in country X and then it will basically tell the national authorities. By the way, we are withdrawing the banking license for that bank because this bank is not properly done. But please, you guys, you take care of the problem. It's not going to work. The national resolution and the national authorities will resist this and they will say, well, you screwed it up in Frankfurt, you didn't supervise this properly and now we have to pay the bill. That's inconsistent. It won't work. Doing just the fiscal backstop without actually the resolution tools I think is not going to work as well. You cannot expect from taxpayers to pay for banks in other countries without even having the tools to reduce the costs for the taxpayers. And every national resolution authority will have every incentive to impose as little costs on their domestic creditors and as much costs on the federal fiscal backstop. Now, the discussion on the single supervisory mechanism, where do we stand? Well, I think we have a proposal by the European Commission which is based on Article 127.6. Now, the legal base has been chosen not even by the European Commission but by the heads of state. The legal base has significant disadvantages, but well, that's what we have currently and so I think we should currently move ahead with this but we should be aware that they are very significant disadvantages. Now, let me talk first about the pros. I think the pros of the commission proposal are that basically you have very broad powers given to the ECB, both in terms of information, remedial action and the power to actually withdraw a banking license. So what we have here in the proposal really is a major step forward towards the centralization of decision-making power in the eurozone. So it's a major sovereign right that is actually being pushed from a national level to a federal level and in that sense it's a really big step towards federalization. It is also important that the commission proposal covers all banks. Now, the real disadvantages of that proposal are I think three-fold. First of all, the governance of the decision-making process as such is not really the best one. First of all, it's the governing council of the ECB that has to take the ultimate decisions, which means all the national central bank governance plus the European central bank executive board. This means all other countries that want to join the mechanism in Eastern Europe are left out from the final decision-making. This also means that at least some people in my country are very concerned that the governance will basically make supervisory decisions with monetary policy decisions. Now, I think this concern is really overstated in Germany but that's the German debate. I think ultimately monetary policy decisions will always have a look at least at what is happening in the banking system. That's absolutely natural. The idea that the monetary policy decisions can be taken completely independently from banking decisions I think is overstated, but my country compatriots really see this as a big concern. But I have to say this is also surprising because the decision in June was to go for article 127 and this decision basically meant that it was going to be the ECB and one cannot say that people have been unaware of the fact that 127 means the ECB. So this decision has been taken so I think we need to go forward with this. Now, there's a big debate about which banks should be covered and so on. Now, I think in principle we should go for all 6,000. Now, what is important I think is that the real supervisory power and the real supervisory action for the biggest 200 banks is really centralized. If you cover the biggest 200 banks in the Eurozone, you basically cover more than 95% of the assets that are out there in the banking system in the Eurozone. So I understand that we should insist on all 6,000 but let's get at least for those 200 biggest, let's get really the power and the actual supervisory authority centralized. Now, the second point is about the fiscal resources which I think is an absolutely crucial point. Now, of course good resolution aims at minimizing the costs to the taxpayers by preserving economic and financial stability. That is very much what the European Commission is trying to do. They put up a proposal on bank resolution and implicitly hope that this will mean there will be no taxpayers' money anymore. Now, I just think this is a very laudable attempt but not very realistic. De facto, fiscal costs, I mean, major banking crisis always cost the taxpayer money and the amount of cost is really significant. And if we think this significant cost should be borne by the national taxpayers exclusively, we are not going to be able to break this link between sovereigns and banks. So we need to have a risk sharing mechanism for basically the big fiscal costs. And just to illustrate what I mean with this, I plot here the distribution of fiscal costs, so the costs to the taxpayers of financial crisis, big banking crisis in history. These are 60 or 70 crisis that are plotted here. And what you see is that, of course, half of the crisis, 50% of the crisis costs between 0 and 5% to the taxpayer. But that also means there's a very significant distribution of countries out here and of crisis out here which costs much, much more to the taxpayer. And of course, one big example is Ireland, which is in this group here, 40%. And of course, we see currently in Ireland that the cost of the bank bailout make it very difficult for the government to regain market access. And so really drives this link between banks and sovereigns. And if you want to break this in the future, we really need to basically go for these big risks. Then I think one point that I do want to mention is the incentives. Of course, if we provide a common insurance, we need to think about what does it mean in terms of incentives. We shouldn't take this lightly. Burn sharing arrangements need to be made before the cost occurs. You need to get the incentives right. You need the centralized resolution and supervision. And I do think, and that's a new point here, I do think we cannot have a system where all the fiscal costs are centralized. I mean, that's not possible. There are too many national policies that have an impact on bank risk other than banking policies. So I think we do need to keep the national taxpayer on the hook, but not for the full bill. That's not acceptable. Okay, so then of course there's the issue of the legacy, which is of course the most interesting being in Dublin. Now let me start by saying I guess the first point is waiting is really very costly. I mean, not solving the banking crisis as we do currently in Spain and in many other countries is really increasing the overall cost. So there is really a case to be made. We need to solve the banking problems as quick as possible, because otherwise growth, everything will be weak and economic activity will be weak. I think we can really say that Europe in many respects is now entering into some form of Japanese disease. So it's really an issue and we should address this. Now the second point is a kind of principle which is of course legacy problems in principle should be for those that have been responsible. That is the principle that you have in every insurance. You get the insurance only after a screening, a health check screening. Now I think there's exceptions that should be granted and there I differ very much with the current German position or at least the position by some people in Germany which I think, I mean first of all when government solvency is endangered we should understand that it's much more costly to endanger government solvency than to allow for direct support for banks. I think we can also argue that there has been a system failure before this crisis. Certainly there was regulatory arbitrage and so on, so there's I think a real case to be made for burden sharing even of the legacy costs. Now I guess you will have on your mind what I think whether Germany is going to agree to the ESM eventually taking over some of the Irish debt resulting from the bank recap. Now to be honest I think in the current framework it's not going to be possible. The ESM implementation law in Germany says very explicitly the ESM resources cannot be used for bank recapitalization so there's an explicit clause in the German law, in this German law and I don't see currently at least the government going again to the Bundestag and trying to pass the modification of the German implementation law of the ESM. So I don't see the ESM as a way at least not before the elections after the elections with a big coalition, grand coalition they may decide to to have a change in the ESM implementation law but I don't see it happening before the election. Now what I could see is I could see a solution which will be kind of accepted which will go via the central bank the euro system, the euro system actually yes, so I finish in one minute the euro system actually providing providing direct help. Now of course the Bundesbank will oppose this but I think Berlin may accept it but okay this I don't. Okay so let me conclude the banking unit is central to end this crisis the current banking unit plan is just about the single supervisory mechanism and therefore it is incomplete I think ultimately we need an agreement on the resolution and on the fiscal burden sharing so we need more federalization basically of what's going on in the euro zone and of course that also means that banking union is also a political project that cannot be separated from political integration including with more parliamentary control the kind of things we are talking about even the supervision means that we need some form of parliamentary control of those people that will take these supervisory decisions and I think the current proposals are still very far away from what we need but at least there's a bit of momentum that we go in this direction. Thank you very much.