We as central bankers are concerned here with avoiding overburdening monetary policy by the next recession, but it is of course the responsibility of politicians to act. 1/ The first cliché that emerges when we talk about reforming the euro area is the opposition between vision – be it French or otherwise – and pragmatism – seen as a northern European virtue. We must be practical, and take real needs and particularly those of businesses and entrepreneurs as our starting point. At the same time, we need a political ambition if we are to act – call it a “vision” if you wish. Today, the key to growth in the euro area is investment and innovation. But to innovate, in digital technology or in the energy transition for example, companies need to be able to take more risks, which requires more equity financing over the 1/3  BIS central bankers' speeches  long term, rather than debt financing. The euro area is seriously lagging behind in this respect: equity capital amounted to only 73% of GDP in the third quarter of 2017, compared to 123% in the United States. This brings me to my first solution for strengthening our Economic Union: a European-level "Financing Union for Investment and Innovation", which would better channel the euro area’s EUR 350 billion savings surplus into equity financing for innovation, in digital or renewable energy technologies.
To work well, our Union needs both: risk reduction mechanisms and risk sharing. As I just said, for crisis prevention to be credible, we should implement fiscal discipline – including the present rules of the Stability and Growth Pact – but we should also have the instruments needed to cushion the effects of asymmetric shocks that may arise suddenly, regardless of all the efforts a Member State can make. It is time to forget about ideological trench warfare. Let me share with you four areas where practical progress is needed: First, bolstering private risk sharing. The simple and obvious way to achieve this is to build the Capital Markets Union within the Financing Union that I mentioned earlier. We are still lagging far behind the United States where capital markets are capable of absorbing around 40% of a state-specific shock. What is more, a genuine Financing Union would further 2/3  BIS central bankers' speeches  increase the efficiency of monetary policy by ensuring better circulation of liquidity in the euro area. Second, EDIS. We have made significant strides with the first two pillars of the Banking Union, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). We still need – and it should be our priority – to strengthen the SRM with a sovereign backstop to the Single Resolution Fund and a simplified decision-making process tailored for emergency cases of resolution. Now, there needs to be some form of compromise to move forward on the third pillar, EDIS, as well.