They will benefit all member states in the single market. However, they will take time to design and longer to implement, and they will have no impact on the burden of the debt overhang that already exists. For complete solutions to both current and potential future problems the sharing of fiscal risks is required. It is no coincidence that effective currency unions tend to have centralised fiscal authorities whose spending is a sizeable share of GDP – averaging over a quarter of GDP for advanced countries outside the euro area (Table 1). I have already discussed how parts of the UK have benefitted from fiscal risk sharing. The euro area also stands out from federal systems like the US, Canada and Germany. In those systems, the impact of localised shocks to income is reduced by between one tenth and one fifth by centralised fiscal transfers (Chart 6). Without this risk sharing, the euro area finds itself in an odd position. As the Presidents of the European Council, European Commission, Eurogroup and European Central Bank argued in their report, European Monetary Union will not be complete until it builds mechanisms to share fiscal sovereignty. Possible options for sharing fiscal risks range from a transfer union to a pooled employment insurance mechanism. The latter would appear to be an opportunity to combine the current enthusiasm for labour market reform with the longer term imperative to build elements of an efficient transfer union. And it would ensure risk sharing was based on cyclical, rather than structural, labour market positions.
See tables 4.4 and 4.5 of Scottish Government (2014), “Government expenditure and revenue, Scotland 2012-3”. 12  Exchange rate effects alone led to an improvement of £ billion to the UK’s net international investment position between 2006 and 2008, estimated in Whittard (2012), “The UK’s External Balance Sheet – The International Investment Position (IIP)”, ONS, March. 13  See Carney (2014), Speech at the 146th Annual Trades Union Congress, Liverpool. 4  BIS central bankers’ speeches  Our remit recognises that the inflation rate may, on occasion, depart from the target and that attempts to keep it at the target may cause undesirable volatility in output. That flexibility and focus meant that the Bank’s Monetary Policy Committee (MPC) could provide additional stimulus through historically low interest rates, large scale asset purchases and monetary policy guidance even when inflation was temporarily above target. Inflation has recently dropped sharply to 0.5% – equalling its lowest rate on record. So next month I will write the first open letter from a Bank of England Governor to a Chancellor explaining why the inflation rate is too low and what we are going to do about it. The why is relatively straightforward. The majority of the weakness is caused by sharp falls in commodity prices, most notably oil, which has suffered its third largest fall in the past half century. Lower energy and food prices are unambiguously positive for the UK. Temporarily low inflation will boost real take-home pay and help household finances.