These measures needed to be implemented rapidly and central banks were in an advantageous position for acting swiftly due to their vicinity to financial markets, their operational framework and their clear and independent decision structure. But these measures ultimately have their limits in terms of effect and legitimacy. The risk of undermining the primary mandate of central banks needs to be taken into account. Yet, I will argue that indeed crisis management and, hence, the preservation of financial stability is an integral part of our role as central bank, serving ultimately to fulfil our mandate. The Treaty commits the ESCB primarily to maintain price stability in Article 127/1 and confers the task on the ESCB to contribute to the stability of the financial system in Article 127/5. Our mandate is clear, it is comprehensive, it is adequate and it should not be questioned. Clearly, central banks should not be overburdened. In the ECB’s case, short-term stabilisation measures were important and necessary. However, structural problems require a structural response. These deficits need to be addressed by reinforcing the available policy instruments outside the purview of the central bank. The work for the report by the four presidents of the European Council, the Commission, the Eurogroup and the ECB, which will be submitted to the Heads of State and Government at the end of this year, is an important step to address the economic misalignments and institutional shortcomings in the euro area.

How has the Pact changed? The fiscal problems encountered by some countries during the downturn triggered a change of the Stability and Growth Pact. In my view, changes were necessary and many of the amendments to the Pact go in the right direction. However, some of them make the framework less predictable. The change consists of three parts: better governance, changes in the preventive arm and changes in the corrective arm. Better governance Better governance includes better budgetary discipline at national level, more realistic forecasting and more reliable statistics. National budgets should be complementary to the member states’ commitments under the Stability and Growth Pact. National institutions could play a more prominent role in budgetary surveillance through increased attention to the development of public finances in public opinion. But apart from those general words, the reformed pact does not spell out any guidelines for appropriate developments of national institutions. Within the EU we have now begun to analyse various forms of national regulations. I hope that the continued work will lead to stronger anchoring of fiscal policy among the member states. I will return to this question a little later. More realistic forecasting consists of having some common assumptions, mainly on external developments, in the stability and convergence programmes. The experiences from the first year of the reformed Pact indicate that it has led to more realistic national growth forecasts. More reliable statistics refer to budget data problems ranging from creative accounting via methodological problems to understaffed and non-independent statistical compilers.