were already fully aware of the risks of having a single monetary policy without a centralized european fiscal policy counterpart. this awareness gave birth to the eu bis central bankers ’ speeches stability and growth pact in parallel to emu. as the crisis showed, the provisions of the stability and growth pact were not strong enough to prevent a destabilizing accumulation of public or private debt in a number of countries before the crisis, so that the needed fiscal impulses were limited during the crisis. at the eu level, we therefore see a whole set of new institutional arrangements to provide for long - term fiscal sustainability. there is a far - reaching consensus about the intentions of these arrangements : public deficits and debt levels need to be limited and adequately supervised. this is all the more relevant for member countries of the euro area that do not have access to central bank financing and that are exposed to free capital movements. there are, however, divergent views about how fast to achieve the reduction of currently high, mainly crisis induced, levels of public debt. whereas european institutions, including the ecb, advocate strict and tight timeframes, imf and u. s. economists tend to prefer a more flexible approach. this discussion is not new and will remain a central issue of the political and economic debate in the near future – and it is a discussion where easy answers indeed tend to be misleading. the difficult political process of regaining fiscal sustainability must of course be strengthened and controlled without damaging the still very fragile process of economic recovery. it is true that future economic growth will depend on a number of supply - side structural reforms of the labor and products markets. but in the present situation of still low capacity utilization in many fields of the economy, of low investment and especially of alarming rates of unemployment in many countries, it seems to be obvious that the demand - side of the economy is also of relevance – and that additional demand cannot be expected to come from ever - increasing current account surpluses of the eu. in this context, it is quite interesting to see that alexandre lamfalussy already at a very early stage referred to the problem that a lack of fiscal coordination could lead to substantial policy inefficiencies with regard to macroeconomic disequilibria – and could overburden a european single monetary policy in the long run : “ the combination of a small community budget with large, independently determined national budgets leads to the conclusion that, in the absence of fiscal coordination, the global fiscal policy of emu

system to guarantee a strict monetary policy. the alternative view is the “ locomotive theory ”, which reflects the experience of the robert schumann - jean monnet approach after world war ii. in this view, economic cooperation projects starting with the european coal and steel community in 1952 created an evolutionary process toward an “ ever closer union ”. it is obvious that a political union using the coronation theory as a starting point is only realistic for a small, rather homogenous group of european states. after various rounds of eu enlargement this concept of a small, homogenous europe was no longer realistic ; moreover, it was no longer in germany ’ s interest. so alexandre lamfalussy reports in an interview with david marsh how much he agreed with helmut kohl on a fast - track approach to monetary union. ( marsh, 2009, p. 191 ). the maastricht treaty provided clear rules for emu membership. but already at this time, there were controversies about “ creative accounting ” and statistical manipulation in some bis central bankers ’ speeches countries. in retrospect, it may be said however, that the ambition of entering emu in combination with the maastricht rules exerted a strong stabilizing influence in all future member states, so that – in accordance with benevolent political agenda setting – emu could start as scheduled in 1999. the question of the division of labor between the ecb and the national central banks had yet to be resolved, another topic which has remained relevant to this day. one important issue was whether the conduct of money market operations should be decentralized, as jean - claude trichet, then governor of the banque de france, advocated, or whether it should be centralized, as alexandre lamfalussy and hans tietmeyer, president of the bundesbank argued. the ecb view prevailed, which proved to be extremely beneficial in the financial markets turmoil of 2007 and 2008 : fast and strong liquidity provision by the ecb was vital for stabilizing the european economy. to come full circle, we now move on to the present - day situation and to the challenges of emu. the present situation is still dominated by the direct and indirect effects of the worldwide crisis that started in 2007 to 2008. in the years before the crisis, central banks lived in the glory – and as we now know the illusion – of the concept of “ great moderation ”. the basic message was that a constellation of independent central banks following a