future problems in the banking system. and if the liquidity is channelled towards sovereigns that find it otherwise hard to access the markets, we run the risk of blurring the lines between monetary and fiscal policy. greece is a case in point here. the emergency liquidity assistance ( ela ) – which was originally conceived as a temporary source of liquidity for financially sound banks in return for good collateral – has been provided for a protracted period of time and has become the banks ’ only source of funding. this casts doubt on their financial solidity. the latter is especially undermined by greek policy decisions that have sparked capital flight and largescale cash withdrawals. banks receiving ela should be urged to do their utmost to improve their liquidity situation and be prevented from worsening it further by rolling over illiquid t - bills of their sovereign. against this background, it should be clear to all the parties to the current negotiations that the eurosystem must not provide bridge financing to greece even in anticipation of later disbursements. when banks without access to the markets buy debt of a sovereign which is bis central bankers ’ speeches likewise locked out of the market, taking recourse to ela raises serious monetary financing concerns. respecting the core principles upon which our monetary union is built is not a matter of dogmatic german stubbornness, but a key policy condition for long - term economic prosperity in the euro area and for maintaining popular support for the historic project which european integration no doubt is. besides the balance that monetary policymakers themselves have to strike, there is another state of balance they count on to maintain price stability – a well - balanced financial system. 2. credit and capital : competition or complementarity? let us have a closer look into the relationship between bank - based financing and marketbased financing. does one detract from the other, or can one deliver benefits where the other one comes up short? to put it succinctly : are credit and capital competitive or complementary? the debate on the superiority of bank - based or market - based financial systems is decades, if not centuries old. 1 one notable development that sparked this debate was the differences in growth between germany and the uk in the late nineteenth and early twentieth centuries. some argued that it was the pre - eminence of banks and their close relationship with their clients that facilitated the rapid growth of germany ’ s manufacturing industry. others pointed out that while manufacturing growth in germany was faster,

but not arbitrarily ) by including some elements of direct inflation targeting. the multitude of additional information could be compressed in this sense into a formal inflation forecast. personalities the ecb statute does not seek to establish a currency standard excluding all and any room for discretionary manoeuvre. consequently, a role will be played by the personalities responsible for formulating and implementing monetary policy. that applies especially to an institution which is completely new. public controversies about the filling of top posts damage credibility. monetary union will not be additionally bolstered by a political union. the leading personalities will therefore be associated almost inevitably with their respective national states, yet in the end they are to execute a common policy, namely a single european monetary policy, and to withstand political pressure. the same applies, by the way, to the governors of the national central banks. misgivings are therefore called for if, for example, there are intentions to introduce accountability towards the national parliament. iv conclusion the maastricht treaty has largely laid the foundations for a stability - oriented monetary policy as far as the institutional arrangements are concerned. those foundations need to be complemented by an appropriate strategy and a convincing decision regarding the choice of the leading personalities. the launching of a new central bank and a new currency is accompanied by uncertainty. the associated risk premium in the interest rate can be kept down by choosing an appropriate strategy and suitable top executives. the financial markets will keep a critical eye on the ecb right from the start. the initial monetary policy course thus takes on crucial importance. some people are therefore already advising the ecb to pursue a particularly restrictive course right from the outset so as to nip any mistrust in the bud, as it were. such an uncompromising approach would inevitably give rise to tensions within the council. it is also hard to imagine that the ecb would meet with general approval for such a course among the people of europe, given the high level of unemployment. at the moment we do not even know whether there is a stable european consensus on the acceptable or optimal rate of inflation. the trend towards the convergence of inflation rates at a low level is a good omen. in a monetary union without a flanking political union, we shall simply have to wait and see whether this convergence of preferences will prove to be a lasting phenomenon. the consensus regarding the preference for stable money - the common “ stability culture ” - is all the more important as monetary union will have to survive for the fore