If our monetary policy impulses are not transmitted uniformly to all of the area’s countries because of the bank-sovereign link, it undermines the very foundation of Europe’s monetary union; remember that three quarters of the financing of the euro area’s economy consists of bank loans. By breaking this link, a banking union would restore the federal dimension of monetary policy. Today the first pillar of the banking union is being constructed: the Single Supervisory Mechanism. We are currently working on legal issues, on identifying systemically important banks within the euro area, on the supervisory model, on the future data reporting and, of course, on the asset quality review that will be undertaken before we take on the responsibility of supervision. The governance structure we have adopted will guarantee that, while the Governing Council will keep the decision power, there will be no conflict of interest between monetary policy and banking supervision. On the contrary, more consistent supervision across the euro area should allow for the early detection of potential risks and imbalances and, ultimately, improve the transmission of monetary policy. This is a fundamental first step and its rapid implementation will be a major success for the euro area. But, alone, it cannot achieve the objectives of a banking union. That is why we must rapidly construct its two other pillars: a supranational bank resolution authority and a unified deposit insurance system.
Overall, the June 2013 Eurosystem staff macroeconomic projections for the euro area foresee annual real GDP declining by 0.6% in 2013 and increasing by 1.1% in 2014 thanks to three main drivers: export growth, accommodative monetary policy and low inflation. BIS central bankers’ speeches  1  2. How can we boost growth further in the euro area? A strong fiscal stimulus obviously appears unfeasible, given the necessity to rebalance public finances. I want to stress two things here: •  The euro area has very rapidly and efficiently set to work to cure its fiscal weaknesses and can today boast some of the best results among the major developed economic regions: its public deficit has been reduced from 6.3% of GDP in 2009 to approximately 3% today; by the end of 2013, the euro area should show a positive primary balance;  •  While the commitment to progressively achieve sustainable levels of public debt and deficit has to be achieved; the measures need to be designed in such a way as to limit the negative side-effects on growth. For instance, efforts need to be focused on non-productive spending. In fact, there is only one way to durably raise the growth potential of our economies, and that is by structural reforms that enhance competitiveness. It is clear that the euro area is well equipped to confront the challenges of the 21st century. With 370 million consumers and high purchasing power, it remains the biggest market in the world.