Indeed, by urging governments to aim for a fiscal position close to balance or in surplus in the medium term, the Pact enables them to let fiscal deficits increase during recessions without exceeding  5  BIS Review 81/1999  the 3% reference value. In short, it allows them to create a fiscal buffer during normal economic periods that can be drawn on, if an asymmetric shock occurs. í  The third condition is that all European countries must undertake structural reforms. Continental Europe is experiencing high levels of unemployment, despite the fact that the jobless rate has been declining slightly in most of its economics. According to the IMF, around 80% of this unemployment is structural, that is, generated by our burdensome rules and regulations. The Monetary Policy Council of the Banque de France agrees with this analysis. Just recently, some external observers were still blaming Europe for its focus on the euro, instead of what they considered the more urgent task, namely the implementation of structural reforms necessary for more dynamic job creation. These critics were wrong regarding the untimeliness of the euro, but their assessment of the problems of the European economy is obviously correct. The euro will be a stimulus to structural reforms. Most importantly, the single currency is decisively contributing to achieve the single market in the three markets of goods, services and capital within the euro zone.
One study finds that capital market risk-sharing in the US dropped by almost half in the crisis period.19 But this does not alter the conclusion that deepening private risk-sharing in the euro area would be beneficial for macroeconomic stability. So how can we achieve it? The experience of other monetary unions, and our own up to now, suggests that it does not happen by itself. Rather, private risk-sharing has to be enabled by public sector policies at both the national and union levels. In this sense, private risk-sharing cannot be seen as a substitute for the further development of EMU. It is a complement to it and follows from it. The policies we need fall into two main categories. 3. Creating a more stable financial sector First of all, we need policies that make the financial system more stable, both by increasing the resilience of banks and by completing the banking union and the capital markets union. The euro area has already made good progress on these fronts. The post-crisis regulatory reforms have significantly strengthened the banking sector. The Common Equity Tier 1 ratios of significant banks have risen from 8.7% in 2008 to 14.5% today. In the same period leverage ratios have risen from 3.7% to 5.8%.20 And banks have much more stable liquidity and funding. 4/9  BIS central bankers' speeches  The creation of European banking supervision has also brought about a more uniform approach to how banks are supervised.