capacity utilisation, an increase in per capita employee compensation of 2. 9 % is expected. but it was not primarily my assessment of the need for action which made me sceptical about qe, but more the combination of the need and the instrument at hand – government bond purchases. i do not expect qe to have no impact on inflation. but the effects are difficult to gauge, and it can be assumed that they will be weaker than in the us, for example, because interest rates in the euro area today are already much lower than in the us, especially when the first qe programme was launched. moreover, the funding of us companies is much more capital market - based than that of european businesses, and wealth effects are generally smaller, too. and government bond purchases involve the fundamental risk of mutualising sovereign liability risks via the central bank ’ s balance sheet. while this risk can be more or less ignored for countries with their own currency, it can be a major problem for a monetary union – especially so for one which, like the european monetary union, is not a fiscal union. at the end of the day, it could introduce common liability through the back door. and in this regard, i am a guy who prefers to use the front door. that is to say that it ’ s up to elected governments and parliaments to make such far - reaching decisions. i do acknowledge that the adopted sovereign bond purchase programme partly takes into account some of the concerns related to earlier programmes : only a small part of the programme is subject to risk sharing among the central banks of the eurosystem. additionally, the governing council decided on limits for the eurosystem ’ s purchases of individual bond issues and for its overall purchases of debt of one single country. this is designed to ensure that governments continue to rely on the capital markets for their funding. despite all these measures, which obviously make the qe programme less problematic than earlier sovereign bond purchase programmes which aimed to reduce the risk premia of individual countries, one important risk nonetheless remains : the national central banks will become the most important creditors to their governments, which might ultimately put the independence of monetary policy at risk. the purchases will make life easier for finance ministers. they will not be amused when the governing council considers exiting its ultra - loose monetary policy. and they might be tempted to put political pressure on the eurosystem. in the european monetary union, however, fiscal discipline is absolutely essential because the set - up of

jens weidmann : heading for stability and prosperity – bringing the euro area back on track keynote speech by dr jens weidmann, president of the deutsche bundesbank, at the city of london corporation, london, 12 february 2015. * 1. * * introduction lord mayor ladies and gentlemen i am very pleased and honoured to speak here at the guildhall today, so thank you for the invitation. i do not always agree with the financial times ’ chief economics commentator martin wolf, but he was absolutely right when he wrote in one of his recent commentaries : “ these are exciting times in european central banking. ” indeed, they are. the excitement is due, not least, to the controversial decisions that have been taken recently. i would like to seize this opportunity to explain to you my view on current monetary policy issues, although i also wish to talk about the future of european monetary union ( emu ). 2. “ masters of the universe ” ladies and gentlemen the first time i heard the expression “ masters of the universe ” was in the early 1980s when the action toy figures of the same name conquered toy markets worldwide. by 1986, sales had ballooned to usd 400 million before plunging to a mere usd 7 million just one year later : the strong and virtuous he - man and his sidekicks took a fall and never recovered. in the same year as those figures vanished from the toy shops, a bestselling novel by tom wolfe took the book stores by storm : the bonfire of the vanities. the slightly unsavoury hero of the story, a fixed - income broker on wall street, and his colleagues in the bond department considered themselves to be the very “ masters of the universe ”. since then, the members of the toughest and most sophisticated business areas of the financial sector have frequently been referred to as “ masters of the universe ”. since the global financial crisis, however, the reputation of the financial industry has been seriously tarnished, above all in the public eye. while many were certainly to blame for the crisis, it became obvious that insufficient financial market regulation and wrong incentives in the financial system, for example in remuneration, contributed significantly to the crisis. when the financial system was on the brink, governments and central banks had to step in to maintain financial stability and protect the real economy from negative spillovers. in normal times, central banks do their business without attracting very much attention from the public, and rightly so – you may remember mer