Today, I will first elaborate on two challenges that will continue uniting us: the need for good national economic policies, pro-business and long-term oriented; and the need for active multilateralism to face our global challenges. Then, I will dwell on a challenge that we will have to address together: our future relationship and Brexit. ** I. The need for pro-business and long-term national economic policies  Let me start with the challenge of national economic policies. In the euro area, the economic recovery is now robust and broadly-based across countries and sectors. GDP growth should stand at at least 2.2% in 2017 according to our ECB forecast. The ECB’s accommodative monetary policy has contributed to this acceleration of growth in the euro area. Yet monetary policy cannot be the only game in town. Structural reforms in each country, along with stronger European coordination, are of the essence to boost potential growth in the medium term and to treat the fatal disease of mass unemployment. In recent years, several European countries, including in Southern Europe, have successfully carried out in-depth reforms that are yielding positive results in terms of growth and employment. Germany, the Netherlands and Nordic countries, as well as Spain and Portugal, are proof that economic success, a solid single currency, and the European social model are compatible. We should run pro-business, long-term oriented, fiscally sound economic policies, while keeping the core elements of a common social model, which can be the DNA and pride of Europe in this highly divided world.
To supplement this backward-looking analysis the FPC layered on a forward-looking judgement that the new bank resolution framework, put in place following the crisis, would reduce the gross benefits of capital. Holders of bank debt and equity now expect to be bailed-in if a bank is resolved, and so exert greater market discipline on banks to prudently manage their risks. This reduces the probability and severity of future crises (GDP-at-risk), and reduces the additional benefits of also adding more capital. The ‘gross costs’ were based on estimates of the relative costs of equity and debt funding, as well as macroeconomic estimates of what a given increase in bank lending rates implies for growth. Both of these costs and benefits are estimated to be largely constant over time. 24 “Supplement to the December 2015 Financial Stability Report: The framework of capital requirements for UK banks”,  Bank of England (2015). The analysis underpinning this framework is published in Brooke, M et al. (2015), “Measuring the macroeconomic costs and benefits of higher UK bank capital requirements”, Bank of England Financial Stability Paper No. 35, December. 24  All speeches are available online at www.bankofengland.co.uk/news/speeches  24  The FPC’s analysis pointed to an optimal range for structural capital requirements and buffers totalling 1014% of risk-weighted assets (Chart 17). This range maximised the expected future level of GDP. The range reflects the considerable uncertainty around the estimation.