In principle, the question is whether and to what extent automatic balancing mechanisms should be invoked on the EU general fiscal stance level and be targeted at the smoothing of regional disparities with automatic income transfers from the wealthy to the less-wealthy regions - thus, in fact, compensating for the lack of the exchange rate mechanism within the single currency regime. Also in recent months the question has been raised whether or not the requirements of the Stability and Growth Pact are too rigid. By way of general comment, I should say that there are sufficiently many examples of great disparities between different regions of a federal state. Regional policy is crucial also for states with high labour mobility. Ultimately, the success of regional economies depends primarily on the efficient resource management and extensive income transfers can even slow down the adjustment process. In my view it is obvious that as long as the European Union remains to be the alliance of independent member states, there will be neither need nor possibility for any additional communitisation. Exceptions could include precisely defined circumstances when an intervention on the EU level would be justified in order to ensure the uninterrupted functioning of the internal market. Harmonisation of the fiscal policy on the macro level would be automatically accompanied with the tax rate equalisation. At that, taxation policies of any given member state reflect principal choices of their internal policy and preferences of the entire society.
Market Functioning Speech given by Chris Salmon, Executive Director, Markets, Bank of England  OMFIF City Lecture, London Tuesday 24 January 2017  I am grateful to Charlotte Barton, Nick Butt, Liam Crowley-Reidy, Nick Govier, Tom Horn, Rebecca Jackson, Sarah John and Nick Mclaren for their assistance in preparing this speech. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction  It is a pleasure to be here this evening. The economic and political events of the past twelve months raise many questions. From my vantage point as the head of the Bank of England’s Markets Directorate, they reemphasise the need for central banks to understand the structure and functioning of core financial markets. That matters both for our role as guardians of financial stability, and to ensure the effectiveness of our own operations to implement monetary policy. Let me illustrate this with reference to developments in two very different markets. i)  The first – the sterling FX market – a large, global, highly liquid, and almost continuously traded, market, with a constantly evolving structure. Here, the challenge is to understand how those developments affect the functioning of the market. My focus will be on the lessons about market functioning from two particular episodes last year: the period immediately following the EU referendum and its ‘flash crash’ a few months later. ii)  The second market – the sterling corporate bond market – is small, local, and thinly traded, with heterogeneous underlying assets.