Europe has profited a great deal from this integration: it is estimated that the Single Market raises GDP in the EU by around 9%, taking into account both the direct trade and competition effects. [7] But as countries become more interlinked, they also become more exposed to volatile capital flows, unfair competition or discriminatory actions – and this necessitates greater protection for their citizens. That protection, which EU countries have created together, has allowed them to garner the benefits of openness while limiting, to some extent, its costs. The EU’s common structures and institutions contain spillovers, ensure a level playing field and prevent unjust behaviour – in other words, they respond to the needs of citizens and allow countries to exercise sovereignty. Thus the Council and the European Parliament set common rules for the whole EU, the Commission ensures they are observed, and the European Court of Justice (ECJ) provides for judicial protection if they are violated. In the euro area, European banking supervision and the Single Resolution Mechanism help to contain the effects of financial instability. In this interconnected environment, seeking independence from EU institutions presents complex trade-offs. Countries either have to accept rules decided by others to ensure continued access to the European market, which gives them less control over decisions that affect their citizens’ interests; or they have to disentwine themselves from their most important trading partners, which gives them less control over their citizens’ welfare.
William C Dudley: Remarks at panel discussion on fiscal challenges Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at panel discussion at 2012 US Monetary Policy Forum, sponsored by The Initiative on Global Markets, University of Chicago Booth School of Business, New York City, 24 February 2012. *  *  *  It is a pleasure to have the opportunity to speak here today on a panel with Charles Plosser of the Federal Reserve Bank of Philadelphia, and Juergen Stark, formerly of the European Central Bank. Our topic today is fiscal policy–for central bankers always dangerous waters to swim in. I will focus my remarks on the United States as others are better qualified to comment on the situation in Europe and elsewhere. To start, let me stress that it is essential that the United States put in place a credible program of medium-term fiscal consolidation that addresses our sizeable and growing structural deficits in a manner that is consistent with supporting ongoing economic recovery. Today I am going to discuss two specific issues relevant to U.S. fiscal policy. First, I am going to highlight the importance of taking the increase in debt service costs into account that will take place when economic conditions permit the normalization of monetary policy. I will argue that we are in an unusual period in which net interest expense is temporarily depressed.