 Thank you very much for your very kind words of welcome and Thank you very much for having invited me. It's really a pleasure not only to be in Dublin although shortly too shortly, but to participate in this event of the Institute for International European Affairs I must say I wish I could have made an address on Something like the U are as new strength. You know something in that vein I think nevertheless you were right to choose the the title fishing fixing Europe's financial crisis for this conference Because we are indeed faced with a number of difficulties and uncertainties Growth is sluggish the necessary reforms are demanding and And financial markets are still very volatile But I think there's at least one extremely positive element that emerges from this gloomy picture and that is That we we think we know now What is needed to fix Europe's financial crisis and what we need in my view is three interlinked challenges to be taken up simultaneously fiscal discipline boosting long-term growth and and Complete the monetary union with the financial union and I want to say a few words on these three aspects of what I see as an overall solution to the crisis But before that I Would like to make a few remarks on the situation in Ireland Because I think your country and I very often Use this argument in other places That your country is the perfect illustration that the solutions. I'm going to talk about Are the right ones and that they work? First before the crisis Ireland demonstrated That a strong fiscal consolidation is compatible with growth and You succeeded in bringing down your public debt to GDP ratio from around 130% in the early 90s to less than 30% you told me 25% I think around That was in the in the mid 2000s While enjoying of course strong growth during these years Second Ireland was badly hit by the banking crisis of 2008 and required an UIMF program Which your country has perfectly implemented since then Understanding rapidly that significant efforts were required. I think you made the right Difficult decisions quickly Cutting public spending lowering wages were needed Implementing some number of structural reforms although you need less than than other countries to be honest And as a result your public deficit has considerably decreased You returned to a path of growth last year notably thanks to the competitiveness of your exports you even managed to successfully return to the short-term securities Market earlier this month for the first time since 2010 well this success to me Shows two very important things one that if a country follows this program carefully and makes the necessary efforts it works and I think this should inspire the other countries in the program and second That European economic integration is essential in good as in bad times The fact that more than 60% of the people in this country Voting in favor of the latest referendum to me illustrates that the population Understood this way This this point very well Now back to the three main instruments that I think are needed to fix our crisis and starting with a fiscal Consolidation efforts which need to be to be pursued if we look to what happened since 1998 and The deep reasons for the crisis of the uaria I Think this crisis is rooted in the individual and collective inability to have followed a fiscal discipline during the first decade of existence of the single currency and That the and that's the most important reasons not the only one I will come back on some others, but That's the most important so the cure begins with fiscal consolidation and even more importantly a credible fiscal discipline framework The efforts which have already been made on the fiscal fund by the individual countries of the uaria I think are already bearing fruits Not only is the absolute level of the uaria as deficit half of that of all the major economies But also the pace of fiscal consolidation is actually much greater So if we compare what happens in this area To what happens say on the other side of I was able to set the channel for you It's not the channel, but you know what I mean Yes, your neighbor or on the other side of the Atlantic or Somewhere in the Pacific. I think we have not We have nothing to and to be fearing off in terms of comparison And I think this is clean and an asset for us today and it must be an element of confidence both for the markets and for Economic agents, which needs of course to be further enhanced Beyond these national efforts a more powerful common discipline framework has been put in place Which represents a significant progress towards a more integrated economy union We have to realize that the Legislative package is called six pack which entered into force in December Considerably reinforces the stability and growth back to a surveillance power for the European Commission of the national budgets enhanced sanctions which have become Casio automatic the criteria for public debt and public spending and being more closely scrutinized and In addition the treaty on stability coordination and government establishes a comprehensive new fiscal compacts including a particular requirement for structural deficit not exceeding half a percentage point of GDP And I think we need all that we needed all that we need that to be a truly implemented And that is not impairing growth. Why because at current debt levels Economic agents would react to fiscal permissiveness simply by delaying their own private expenditure and That at the same time with the same kind of permissiveness Financial markets could continue to impose punitive interest rates on our countries compensate for the uncertainty of the fiscal outlook And all the confidence and financial benefits of fiscal consolidation To me far outweighs its negative effect on the effective demand in the short term And it is of the essence that all the efforts on this side be decisively pursued Now moving to the second aspect the growth enhancing measures which are needed To me another major explanation of the crisis is the development of competitiveness gaps Between the urea countries throughout the last decade Here I think the economic rationale is easy to understand but Not many Not many governments have thought about that before the before the crisis When you join a monetary union Where the goal set by the central bank in implementation of its mandate is To achieve a rate of inflation or just below 2% Changes in unit production costs must be in line with this Objective because the central bank is credible and will manage to achieve the objective anyhow It must be in line Modulo would say the productivity changes productivity gains So if you make 1% productivity gains on average you may have an increase in production costs of 3% Which is while keeping your relative productivity if you make 2% you can have 4% etc but if you have half a percentage point of productivity gains and Doing 10 years you increase the wages in the in the private sector and the public sector by say five six percent a year After a decade you've lost 30 to 40 percent and you are dead and Some in the URI are in this situation or have been in this situation. It's as simple as that I can tell you every month in the your group before the beginning of the crisis The president of the ECB was invited by the ministers and would typically come with a graph showing the evolution of labor labor unit the production unit costs and Including productivity changes of course and this graph was clearly demonstrating that they were going into the wall And he was telling them every month you are going into the wall But now he would listen to him because there was no evidence of any problem So this is why it is so important that the new stability and growth path now provides a framework for the surveillance of macroeconomic imbalances and for competitiveness developments So it's clear that it's one of the major factors for long-term growth and That it is extremely important that we succeed in boosting Competitiveness today now you will tell me how can we do that? Basically through structural reforms of the goods and services and labor markets for instance And I must say that the progress made in some fields by some countries are to me Extremely impressive and very encouraging and I think in recent history never European economies have Reformed so extensively in such a brief period of time and I could cite many examples some of the most Obvious are the labor market reforms in Spain and in Italy. We know that in Spain for instance the degree of cost competitiveness was not that bad but The productivity of the economy was deeply hampered by The rigidities in the labor market so changing that is absolutely key to restore and the growth engine in this economy now that the bubble has gone We could also mention the pension reforms in countries like Italy and France Such reforms anyhow are a necessary foundation for dynamic and sustainable growth in the future And and they must be vigorously pursued Having said that And without endangering the very constrained fiscal situation There may be also some room for some direct public support growth measures And I think those Which have been chosen which may Help a little bit the economy the economic recovery to To check place and accelerate using money which is already They are marked in the in the European funds or using the tool of the European investment bank or is a very good idea and I think this is 120 billion package adopted by the by the summit is a very good thing Now what about the central bank and we often hear people asking why doesn't the ECB support growth more actively? Actually the the ECB and the euro system have done a lot for supporting growth in the beginning of the crisis By several channels the first one is The fact that we have maintained price stability and never forget price stability for us Is both to avoid excessive inflation and to avoid deflation or to low inflation Mentioning price stability throughout the crisis is really the key asset To provide confidence to preserve the purchasing power of the citizens and to to clarify the the future for Decision makers of investments in the in the private sector in the corporate sector Second of course we have constantly provided all possible supports But in the scope of arm and did to help the banking system overcome its difficulties And it is all the more important in in an economy where most of the financing of the economy comes from Comes through banks So that has been a major contribution to economic activity and growth and one one example among many Has been the the two three years LTA rules with the idea there was really to remove the funding pressures from the banking sector to allow for a smooth adaptation to new routes and to prevent a major credit crunch that would of course have compromised the economic recovery And also by the way the maintenance of price stability But these of course helps and can help but does not Remove the responsibility of governments to revive growth through a credible fiscal path and structural reforms Now third element institutions and the issue of the financial union I think it's a Third very important reason why the URI has he been hit badly by the crisis. We are a very integrated economic area without having all the appropriate institutional mechanisms for instant integration and one clear Example of that was the financial sector which is we had seen the banking sector starting to To become more and more a European banking sector a URI banking sector investing in various countries but without Having done anything from the institutional standpoint to change the basic relationship between Governments and their banks and of course this was not apparent during a decade because there was no problem but the day The first episode of the crisis came I mean the peace out starting in the United States And culminating just after Lehman brothers Failed It became evident with a number of governments all around the world supporting their banks and indeed That was Difficult experience also in this country But almost everywhere there was some some help or some support for some time Then it clearly appeared to market players that's The link between banks and sovereign was extremely strong and that in the end The capacity of the banking sector to survive in case of adverse developments was depending on the capacity of the of the state of the government to support it and on the other hands that In case the banking sector was weak then the Finances of a member state would suffer and of course all this is extraordinarily important because We have seen negative feedback loops Created at the time where the good and current functioning of the banking sector was so vital for for the URI economy And where Governments were challenged on the markets So what do we need to do well, we need to have something which will First ensure appropriate financing Whatever happens to the finance financing of the economy, whatever happens to the finance to the fiscal situation in a country We need to avoid this negative feedback loops and the interactions between Hits in the banking sector hits in the in the in the public sector Which by the way increases the potential incidents of bank runs We need to Foster confidence in the financial stability And from our point of view of central banks We need to ensure a proper transmission of our monetary policy. I'll take an example, which is neither French nor Irish, but Suppose that The banks because they are Seen as linked to the strength of the government and the rating agencies indeed that change the ratings of the banks When they change the ratings of the governments Suppose that we decide in the ECB to move our interest rate from 1% to point 75 And we will try to we hope that there will be a transmission to the real economy and that it will help to revive The economy we can do that because our projections in In inflation are such that we have room And it's even necessary to be closer to our target We did that a few weeks ago Now what is the result you go to Germany? With a typical German bank typical German SME rate of credit to the SME might be say 3% if we are lucky it will move from 3 to 275 or something like that because the rates of deficit will follow our rates So it works more or less probably Then you go to Italy northern Italy other good economy Where the bank which is as strong as the German Bank? Effectively in in its own quality an SME which is absolutely equivalent to the SME I took as an example in Germany So it should receive the money also at 3% and then to 75 And what do we see the money comes at 7 8% and instead of moving down It moves up because at the same time one of these three agencies decides that the rating is changed So our monetary policy doesn't work. It simply doesn't work and we cannot continue like that We cannot have a monetary union with a transmission that works so differently and I tell very often my German friends You would not have accepted that at the time Where the Bundesbank was making the monetary policy for Germany if the transmission had been Sorry so different from one land to another land that that would not have been acceptable So what do we need in short 23 elements? we need a unified supervision Which I see as the same kind of structure as we have for the euro system. That is we need a central command and We need to have a decentralization of implementation because it would be ridiculous to To say that we should centralize supervision for 6000 institutions for the urea Speaking so many different languages, but we know how to make it work. We have that with the euro system The ECB is just the head the central command But most of the work is being done by the national central banks and it works perfectly well And we have 12 years of experience and by the way It's exactly like that that it works in the United States if you look at the federal reserve system The the supervisors the teams of inspectors are not in Washington DC in the board of governors There is a central command there But the guys are in New York and Chicago in San Francisco And if you look at the the small and medium-sized banks the FDIC and the national supervisors It's even more obvious that you have 50 national supervisors But clearly the central command the authority to restructure to make resolution of banks the authority to Manage the deficit guarantee fund the authority to command the national supervisors to size Some some of the issues is in the FDIC and by the way the Americans have reformed that After the crisis of the saving and loans in the 70s So it's not that old that the United States have come to the conclusion That they needed to fix things and to move it at the federal level In in that kind of organization and the two other elements we need of course is a coherent deficit guarantee scheme probably financed with an annual contribution on all banks in the URIA with the ability to borrow for an intermediate period in the market With a super national guarantee and we need a banking resolution scheme with a resolution fund That could be either separate or mixed with a deficit guarantee fund and an authority to do that Our view as you know is that the euro system will be well equipped to do that implement that sort of reform quickly And we have to note that a wide majority I think 14 out of 17 Countries have already their supervisor, which is either the national central bank or Very close to the national central bank in the hand of the national central bank so that Moving in that direction should be extremely extremely easy. I Think I will stop at that Well, if we move in that direction, we will still need numerous steps and Elimination of substantial example, but if there is a strong political will as there has been in other areas I think it can work. It can work quickly and We will move Towards a more coherent economic and monetary union And I I was very reassured by the fact that At the last summit the political will to move in that direction seems seemed clearly to be to be there Thank you very much