In clearer terms: whatever the limits of the February “Brussels agreement”, I am strongly in favour of the UK remaining within the EU; yet, irrespective of the outcome of the British referendum, the EA can and should pursue further integration. 1  Helmut Schmidt, Remarks at the Farewell event for European Central Bank President Jean-Claude Trichet, October 19, 2011. 2  Building Europe, building institutions, Speech by Jean-Claude Trichet on receiving the Karlspreis 2011 in Aachen, 2 June 2011. 3  Speech by Mario Draghi, President of the ECB, at SZ Finance Day 2015, Frankfurt am Main, 16 March 2015. 4  European Union: progress or regress?, Dinner speech by Ignazio Visco, Governor of the Bank of Italy, Istituto Affari Internazionali 50th Anniversary Conference, Rome, 13 November 2015. 5  Agnès Bénassy-Quéré and Xavier Ragot, Conseil d’Analyse Economique, A Policy Mix for the Euro Area, March 2015 , or Daniel Gros and Cinzia Alcidi, European Parliament In-Depth Analysis, Economic policy coordination in the euro area under the European Semester, November 2015. 2  BIS central bankers’ speeches  Second, tensions and heterogeneity within the EA, especially between the so-called core and periphery, have been exacerbated by the crisis so that the prospect of risk sharing may be perceived as involving permanent transfers across economies. Pooling risks would thus be seen as involving moral hazard, with permanent suspicion of “free rider” behaviour. Yet, we must realise that heterogeneity across countries calls for reinforced cooperation, based on risk reduction together with risk sharing.
Some Member States also proved to be poorly committed to implementing domestic structural and fiscal reforms that would have created more policy space to address shocks. Collectively, the expected dynamics between peer pressure and market discipline did not work, as markets did not believe in the no-bail-out principle, and as national authorities did not really accept peer pressure, nor the implementation of the rules. The absence of coordination has a genuine economic cost. Several studies have estimated it for the EA. It includes a) the cost of crises and assistance programmes, as well as b) the impact on growth due to uneven compliance with budgetary rules before the crisis and rigidity of the rules during the crisis. Let me mention a few numbers. Banking and fiscal crises can be extremely costly: relative to the U.S. growth trajectory, the EA has fallen behind  BIS central bankers’ speeches  3  by 5 percent of GDP per capita since 2011. Both the European Commission 6 and the NIESR 7 have shown the large impact of simultaneous fiscal consolidation in Europe, with around 2% larger GDP declines due to intra-EA spillovers. Optimal policy coordination in the EA would have required differentiated consolidation efforts in line with available fiscal space, leading to better growth outcomes. A last illustration relates to asymmetric adjustment driven by current account imbalances at the country level at the beginning of the crisis and contributing to the large external surplus at the euro area level today.