The role of monetary policy in addressing the crisis in the euro area

The creation of the EFSF and more recently the ESM has addressed this last shortcoming. And in our joint work with the Presidents of the European Council, the European Commission and the Eurogroup, we have set out a vision and a process for building a genuine Economic and Monetary Union. This is designed to cover the other gaps in the institutional architecture that I previously referred to.
The genuine Economic and Monetary Union comprises four pillars: a banking union with a single supervisor; a fiscal union that can effectively prevent and correct unsustainable budgets; an economic union that can guarantee sufficient competitiveness to sustain high employment; and a political union that can deeply engage euro area citizens.

Progress is underway in all these directions. As regards the banking union in particular, a first and important step has been made with the decision to create the Single Supervisory Mechanism (SSM), the responsibility for which has been assigned to the ECB in the last Ecofin. I am confident that the SSM's euro area perspective will make a significant contribution to safeguarding financial stability in the monetary union. In this sense, it will also support the conduct of monetary policy, as a stable financial system is a prerequisite for the proper transmission of our policy signals.
But I would like to stress the importance of quickly complementing the SSM with a Single Resolution Mechanism. This is necessary to guarantee timely and impartial decision-making, particularly in the cases where cross-border resolution is required. What's more, a Single Resolution Mechanism is essential to ensure that the SSM's supervisory decisions for resolution can be followed up with action, without reinforcing the vicious link between banks and sovereigns. Finally, a Single Resolution Mechanism will credibly pursue the least-cost resolution strategy from a euro area perspective, also taking into account cross-border spill-overs.

Conclusion
When considering the challenges that euro area economies are still facing, it is important to remember the economic hardship that many of our fellow citizens in parts of the euro area are experiencing, and in particular the massive unemployment, especially among the youth.
But there are also reasons for confidence. Most of the elements needed to address the root causes of the crisis and to build a genuine Economic and Monetary Union have been set in motion. The ECB's monetary policy will continue to make its contribution to this endeavour, in line with its mandate.
The heavy task of implementing the important decisions already taken lies ahead. All parties involved in this comprehensive reform agenda must persevere. And we must all work with conviction and determination towards our shared vision. If we do so, I am confident that restoring stability and ensuring prosperity in the euro area are within our reach.

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