public debt in 2060 would total around 247 per cent of aggregate output unless changes were made to the status quo. by way of comparison : at the end of 2013, it was estimated at just under 77 %, however, to continue building up new debt would be, as kurt beidenkopf, the former minister president of saxony, once put it, “ tantamount to issuing bills of exchange which my grandchildren will pay off ”. it is therefore evident that there is no way around a more stringent fiscal policy and corresponding reforms to ensure that public finances remain on a sound footing. against this backdrop, the retirement age should not be lowered, but ought gradually to be lifted. in fact, it would be worth considering carrying out such a measure in future subject to certain rules, for example by adjusting the retirement age according to further life expectancy. demographic trends, the independence of monetary policy and the culture of stability ladies and gentlemen, faced with the far - reaching economic repercussions of demographic change, we must assume that it will have implications for monetary policy, too. although the bis central bankers ’ speeches ecb governing council defines the monetary policy for the entire euro area, meaning that country - specific developments only have an indirect influence, i would like to say a few brief words about potential monetary policy problems. there is justification in that because all the large euro - area countries will be affected by an ageing society. given the growing strain on public finances that i spoke of a few minutes ago, there is a danger that monetary policy will also experience greater political pressure to safeguard the government ’ s solvency. what i mean is that the central bank could be pressured into pursuing a laxer monetary policy, primarily one of low interest rates, to keep government financing costs as low as possible. in this way, an increase in the real debt burden would at least be curbed via higher inflation. in an extreme scenario, this could even lead to a situation known as “ fiscal dominance ”, whereby monetary policy is harnessed to the service of fiscal policy and made to subordinate its policy to the interests of government financing. price stability could suffer as a result. both theory and practice teach us that in a stability - oriented economic order, the distribution of roles should be quite the opposite. this means that the task of fiscal policy - makers is to see to sound public finances, leaving the central bank free to focus its monetary policy, with as few restrictions as possible, on its own primary

overall impact of bail - in rules on bank funding, we have to consider their interaction with other initiatives in the field of regulation. let me give me two examples. there is a possibility that the higher cost of senior unsecured long - term debt could lead banks to raise more short - term debt, resulting in a higher maturity mismatch and greater liquidity and interest rate risks. this could happen in particular for those banks that have already a high level of encumbered assets and so are unable to issue long - term secured liabilities. such reshuffle of liabilities will be limited by the proposed basel iii requirements on the liquidity coverage ratio ( lcr ) and the net stable funding ratio ( nsfr ). similarly, recourse to the repo market, which we know is inherently fragile, 6 will be constrained by the envisaged fsb rules on shadow banking. committee on the global financial stability ( 2013 ), “ asset encumbrance, financial reform and the demand for collateral assets ”, cgfs papers, n. 49. see g. gorton and a. metrick ( 2012 ), “ securitized banking and the run on the repo ”, journal of financial economics, vol. 104, no. 3, pp. 425 – 451. bis central bankers ’ speeches as another example, as there is at least in theory a risk that bail - in rules could trigger financial contagion if a significant proportion of banks ’ liabilities are held by other banks or by systemically important non - banks such as insurance companies, 7 we need to understand and if necessary limit such cross - exposures. fourth, we have to take into account the effect of bail - in on banks investment and lending behaviour. let ’ s not forget that one objective of an efficient resolution mechanism is to mitigate excessive risk - taking. as a result of the removal of an implicit bail - out guarantee, bank debt - holders should exert more efforts in monitoring banks, thus mitigating moral hazard phenomena. such market discipline may mean that the expected rise in the cost of bank funding would be counterbalanced by an overall reduction in bank risk and hence the cost of funding may not rise. by redistributing the risk between tax - payers, depositors and debt holders, bail - in rules can reduce the overall risk in the system. the corporate finance literature has pointed out the role of secured bank debt as an equilibrium response