In a nutshell, in the euro area, the more divergent economies become in terms of their structural conditions, the harder it ultimately becomes to achieve price stability at the euro area level. First, structural reforms have a direct link to inflation, inflation expectations and real interest rates through their effect on the adjustment process.
Let me first focus on increased interdependencies created by financial globalisation in conjunction with the other trends that I have just mentioned. The significant benefits of financial globalisation come at the cost of a more complex global financial system. Previously, settlement flows, operational processes and risk management procedures could be considered largely from a national or even more a system-, institution- or market-specific perspective.