temporarily a diverse range of ( pillar i ) calibrations ”. establishing a macroprudential policy framework in a monetary union reminds me of a complicated balancing act. that is, first, to find the right balance between a sophisticated system which is fine - tuned to any marginal change in systemic risk and an approach based on easy - to - implement rules. the second challenge is to find enough flexibility when implementing instruments without endangering the level playing field. so far the discussion is not completed and requires also some practical experience. 6. conclusion so what is the moral of my speech? clearly, i have no sword to remedy the situation. and for those who wish they had such a sword, the idea of undoing knots may sound like “ muddling through ”. but to my mind, this stony road of muddling through, this long - term disentangling of the knot, is vastly preferable to the alternative of cutting the knot. it means doing things the hard way and entails much future sacrifice and commitment. at the end of the day i have nothing to offer but “ toil ” and “ sweat ”. nevertheless, thank you very much for your attention. bis central bankers ’ speeches

- systemic it can be treated in isolation. in the case of the debt crisis, the debt problems of countries can and should be treated as a series of individual problems and not as a systemic problem affecting the euro area as a whole. things are different in the case of a systemic event, mainly due to the effect of contagion loops between the different sovereigns, the loops between the public sector and the financial sector, the contagion loops between different financial intermediaries and ultimately the feedback loops between the financial sector and the real economy. the degree of financial integration in the euro area is such that if some sovereigns are pushed into a bad equilibrium this affects other countries. the banking system can become fragile. what starts as a liquidity problem can easily turn into a solvency problem. strong externalities are created, making it impossible to isolate the problem of one country from the rest of the euro area. bis central bankers ’ speeches at the outset, the event might have originated locally, caused by local problems, in which case it might only be possible to solve it by addressing those root problems. in the meantime, however, we have seen how local problems can turn into a systemic problem. for example, local problems in some countries arise from a low degree of competitiveness, unsustainable fiscal positions or a combination of both. the eventual solution is a gradual and steady improvement of their competitiveness and fiscal positions. there is no substitute for such an adjustment process at the local level. in the present situation, however, we may need additional instruments, for example firewalls or recapitalization measures, to address the systemic component. turning to another example, the interest rates of some countries proved too low during the first decade of the euro, leading to house price booms and credit growth in those countries. these two factors have contributed to the recent crisis. again, local problems turned into a systemic problem. here, the solution is a balance sheet adjustment of banks and households. and again there is no getting round this tedious approach. the instruments to address the systemic component that are now available may assist this process. at the end of last year we saw clear signs of a systemic financial crisis. the provision of liquidity for a period of three years, together with measures to strengthen fiscal discipline and to restructure greek debts in an orderly fashion, has managed to mitigate the stress to some extent ; at least for some period of time. recently, tensions in the