Second, financial institutions should avoid excessive short-termism in their behaviour which tends to place undue emphasis on returns over risks. To that end a number of improvements are necessary, including specific guidance by supervisors on internal compensation schemes. Third, transparency should be enhanced in all respects, including all financial institutions, opaque financial instruments and markets, such as OTC derivatives markets.
This construct has been largely successful: incomes across the continent have materially increased, integration and value chains have developed to an extent unimaginable 20 years ago, and the Single Market has survived intact through the worst crisis since the 1930s.1 But the past 20 years have taught us two vital lessons for a successful monetary union. The first concerns monetary policy.