Some Member States also proved to be poorly committed to implementing domestic structural and fiscal reforms that would have created more policy space to address shocks. Collectively, the expected dynamics between peer pressure and market discipline did not work, as markets did not believe in the no-bail-out principle, and as national authorities did not really accept peer pressure, nor the implementation of the rules. The absence of coordination has a genuine economic cost. Several studies have estimated it for the EA. It includes a) the cost of crises and assistance programmes, as well as b) the impact on growth due to uneven compliance with budgetary rules before the crisis and rigidity of the rules during the crisis. Let me mention a few numbers. Banking and fiscal crises can be extremely costly: relative to the U.S. growth trajectory, the EA has fallen behind  BIS central bankers’ speeches  3  by 5 percent of GDP per capita since 2011. Both the European Commission 6 and the NIESR 7 have shown the large impact of simultaneous fiscal consolidation in Europe, with around 2% larger GDP declines due to intra-EA spillovers. Optimal policy coordination in the EA would have required differentiated consolidation efforts in line with available fiscal space, leading to better growth outcomes. A last illustration relates to asymmetric adjustment driven by current account imbalances at the country level at the beginning of the crisis and contributing to the large external surplus at the euro area level today.
François Villeroy de Galhau: Europe at a crossroads – how to achieve efficient economic governance in the euro area? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, recorded for the event at Bruegel, Brussels, 22 March 2016. *  *  *  Summary There is a growing perception of the need to rethink the economic governance of the euro area. Compelling ideas have been put forward to that effect; yet their implementation is tricky, especially in the present climate of Euroscepticism. Shifting from ideas to action has become urgent if monetary policy is not to remain the only game in town. Clearly, the single monetary policy cannot be a substitute for the coordination of national economic policies or the lack of reforms. To be sure, the debate over EMU reform is politically loaded; but for euro area citizens the poor coordination of national policies involves a high cost in terms of growth, of several points of GDP. The economic case therefore needs to be made: this discussion is not about “more Brussels”, it is about more growth and jobs in Europe. In addition, it is not a choice between domestic reforms or European coordination; we need both. Between complete integration – of the monetary-policy type – and monitored national policies, as currently conducted, the missing link is “full coordination” of fiscal and structural policies. This is clearly shown in a matrix crossing these three degrees of integration and the four policy dimensions (monetary, financial, fiscal and structural).