Yet even after successful structural reforms, in a monetary union with 19 Member States there can always be economic shocks which affect some countries more than others. Flexible labour markets and a responsible fiscal policy help to cushion such shocks – not only in a monetary union. In such a union however they play an even greater role, because the countries concerned can no longer react by way of the exchange rate or national monetary policy. But if the shock is excessive or the economic structures too rigid and the national budget under pressure, the Member State in question may be quickly overwhelmed. This is exactly what we have seen during the recent crisis. The costs of the crisis were borne in large part by the citizens in the crisis countries, but also shifted in part to the European level through mutual guarantees. Basically, the countries concerned resorted to a sort of implicit insurance that was not originally foreseen. This experience gives rise to two key questions: •  First, how can Member States better absorb external shocks – even without an independent exchange rate and without a national monetary policy? •  Second, how can risks be shared at European level without a transfer of risk occurring which distorts the incentives for the individual Member States? A monetary union needs strong members... As for the first question, the euro area countries need economic structures which meet the requirements of a single currency. The crisis has made this abundantly clear.
More than 60 years ago, Jean Monnet, one  1  Standard Eurobarometer 84, November 2015. BIS central bankers’ speeches  1  of the founding fathers of the European Union, said: “Our countries have become too small for today’s world, at the level of modern techniques, at the measure of America and Russia today, China and India tomorrow”. The idea is therefore ingenious and the will of the people is clear. Together, this represents an appeal to policymakers to straighten out what is crooked, to reinforce the foundations of monetary union and once again reconcile the reality of the euro with the idea of the euro. The consequences of the recent financial and economic crisis show what is needed to achieve this from an economic perspective. What we certainly need is a European crisis tool – a mechanism that works quickly, effectively and efficiently in an acute crisis. A first step was taken with the creation of the European Stability Mechanism. But what’s necessary above all are structural reforms at national level, including reforms of social security schemes, labour and goods markets and insolvency laws. Reforms which ensure that the community of 19 countries grow together economically and move closer to the highest international standards. Such a convergence is important, not only to keep monetary union stable in the medium and long term, but also to safeguard economic growth and prosperity.