in protocol no 11 to the ec treaty and thus enshrined in primary european law – not only in the event of a severe recession or natural disaster, but also in the case of any negative annual growth rate ( potentially, even a small one ) or very low gdp growth relative to its potential. moreover, specified were “ all other relevant factors ” to be taken into account when deciding on excessive deficits in accordance with article 104 ( 3 ) ec. this is a long list of potential exceptional circumstances and grounds for exemption hindering the implementation of an excessive deficit procedure. these include “ prevailing economic cycles ”, “ policies in the context of the lisbon agenda “, measures “ to foster research and development and innovation ”, “ debt sustainability ”, “ financial contributions to foster international solidarity ”, contributions to “ achieving european policy goals, notably the unification of europe ” ( in other words : including payments relating to german reunification ) and many more. faced with this list, it is difficult to speak of a consistent, coherent set of rules. ( 3 ) the deadlines for the incentives and sanctions system have been extended, for example, for council recommendations pursuant to article 104 ( 7 ) of the ec treaty, issuing a warning notice to member states in accordance with article 104 ( 9 ), non - interest bearing deposits and, ultimately, fines ( article 104 ( 11 ) ). ( 4 ) furthermore, the deadline for the correction of the excessive deficit was widened to up to two years in case of “ special circumstances ”, which are identical to the “ other relevant factors ” mentioned above. ( 5 ) one change which is more significant than the extension of deadlines but has received less public attention is the possibility now provided for repeating procedural steps. in the event of “ unexpected ” economic events, council recommendations may be repeated and a warning notice reissued any number of times. 24 as a result, the sequential nature of the incentives and sanctions system, whereby each measure is succeeded by a more stringent one, is lost. however, the sequential nature of the old pact was also limited given that the european court of justice 25 had also accepted ( albeit within the bounds of an action brought against the council for failure to act ) the possibility of virtual inaction on the part of the ecofin council – for example, through the rejection of commission proposals for council recommendations. an overall assessment of the changes to the two regulations relating to the pact must find that there is no evidence – at least not in any operational

is known that monetary stability alone will naturally not suffice? or is it to be possible to subordinate the target of monetary stability to other objectives ( such as boosting employment ), depending on the situation? ( then of course - as past experience has shown - there is a risk of forfeiting both in the end, i. e. of ending up with higher unemployment and higher inflation alike. ) the governments which negotiated the maastricht treaty opted for the first answer ; that is to say ( no more and no less ), for basically unpolitical money. assigning this mandate of an independent central bank is quite consistent, especially in a supranational context in which there is no room any longer for divergent national preferences. by their “ yes ” votes, national parliaments have unambiguously approved the treaty. after all, the independence of the european central bank is not shamefacedly concealed in the “ small print ”. it is at the very heart of the treaty. vi lord dahrendorf has criticised emu, saying that it is actually irrelevant to the great topics of the epoch and only diverts attention from the really important issues. profoundly though i agree with him about the existence and urgency of many great topics, as a central banker i find it rather hard to view emu as an irrelevance. what is true is certainly that europe is reaching the crossroads. and emu is clearly not a sufficient answer to everything. europe is faced with major challenges, namely with the three es : enlargement, employment and emu. enlargement mainly raises the question of how europe can remain operational and viable with 20 members and more. of course, i know that some experienced practitioners remain cool and argue as follows on europe : well, the reform of the institutions virtually failed even before any round of enlargement. and it went on for all that. that may be true in a certain sense. but it will result precisely in that often - deplored muddling - through, in which the question of what europe is doing, and how, is settled more by historical accidents than by rational economic decisions. and the eu must not suffer the same fate as the dinosaurs. the greatest challenge facing europe is doubtless the issue of employment - at least on the continent. especially since employment is not only a matter of the right deployment of the macroeconomic instruments - as in textbook economics. in germany, and also in some