Speech by José Manuel González-Páramo, Member of the Executive Board of the ECB
Institute of International and European Affairs,
Dublin 19 February 2010

The current financial crisis has spread across the world at an unusual speed and with surprisingly strong consequences. The fact that the tensions originating from a relatively small segment of the international financial market (the US market for sub-prime mortgage loans) evolved over time into a global crisis of a magnitude unseen in decades – wreaking havoc on a number of economies and the lives of millions – may deceive some into thinking that worldwide financial integration has gone too far and that we would better off under financial autarchy. It is therefore worthwhile to recall what the benefits of financial integration are, especially in Europe. Integrated financial markets help to realise the full economic potential by increasing competition and expanding markets. This results in lower intermediation costs and a more efficient allocation of capital, which in turn raises the potential for increased economic growth. For those European Member States which have gone even further by adopting the euro as the single currency, there are added benefits in terms of price transparency, lower interest rates, reduced transaction costs and the elimination of exchange rate fluctuations. These benefits are very substantial.

European Central Bank