are a key precondition for growth. the reason is that people ’ s concerns about an increasing debt burden and ensuing adjustment needs in the future will affect their spending and investment today. thus, it is important that governments adhere to the consolidation plans they announced. this will inspire confidence, which is an important prerequisite for the economy to grow. as jean - claude trichet once said : “ when you ’ ve lost confidence, when households have no trust, when businesses have no trust, when savers have no trust, then the best way to find growth and jobs is to recreate confidence. ” in my view, this is true not just for the countries at the heart of the crisis. thus, my appeal for consolidation does not stem from a desire to punish past sins. rather, the goal should be to make all euro - area countries stronger, to regain fiscal and economic policy scope for the future and to be better able to cushion adverse cyclical developments. in the current context some critics claim that such a stability - oriented fiscal policy was choking economic growth in the euro area. however, the fiscal policy stance in emu is expected to be broadly neutral in the years 2014 to 2016, not restrictive. therefore, adhering to the fiscal rules would only imply a very moderate tightening but it would offer a chance of a massive gain in credibility. ladies and gentlemen, besides this, regulatory changes should also be considered in order to make the liability principle more effective. the euro - area crisis has shown that failing banks and stumbling states pulled each other down. yet, until now, the insolvency of governments and systemically important banks has practically not been permitted because of the – probably quite realistic – fear that this would threaten the stability of the financial system throughout the entire euro area. so what needs to be done is to break the potentially disastrous sovereign - bank nexus. only this would ensure that sovereigns and banks can fail without creating a systemic risk for the financial system. and in this respect, the basel committee on banking supervision has an important role to play. first, it tightened the capital rules for banks, which are designed to enhance financial sector resilience and so naturally contribute to achieving this goal. second, it has to change the regulatory treatment of sovereign bonds – a topic which is now on the basel committee ’ s work programme. why would this be an important step forward? because it would help to enforce the credibility of the no bail - out clause. the international capital

the stability and growth pact. the stability and growth pact is not the only safeguard against excessive government debt, however. the second one is the rule that member states remain fully responsible for the consequences of their own autonomous fiscal decisions. in other words, making a decision autonomously – which means being in control of it – and, at the same time, being liable for the consequences are two sides of the same coin. this nexus can be referred to as the liability principle or the principle of individual responsibility. the liability principle is simple and straightforward, but at the same time, it is of fundamental importance, as it fosters responsible behaviour and prudent decisions that do not produce results that come at the expense of others. this will be a well - known truth for all the entrepreneurs among you. the liability principle is a constituent element of a market economy. it also implies that enterprises must be allowed to fail and, in consequence, to exit the market. the us economist allan meltzer once put this idea as follows : “ capitalism without failure is like religion without sin. it doesn ’ t work. ” in the context of european monetary union, the liability principle is the reason why the maastricht treaty explicitly rules out the assumption of any member state ’ s debt by the european union or by other member states – that ’ s the so - called “ no bail - out ” clause – or even by the eurosystem, which would constitute prohibited monetary financing. only a credible no bail - out clause and the prohibition of monetary financing enforce the liability principle, which itself is the cornerstone of market discipline. and market discipline is, in addition to the fiscal rules, the second safeguard of sound public finances in a monetary union. ladies and gentlemen, as we have seen, however, all the precautionary measures did not prevent public debt from rising and the sovereign debt crisis from materialising. in this crisis situation, only the european fiscal rescue packages and the eurosystem ’ s stabilising measures prevented the crisis from escalating. nevertheless, these crisis measures permanently weakened the principle of individual responsibility. in other words : although the rescue measures helped to stabilise the euro area, they caused a redistribution of risk and put elements of mutualised liability in place. as a result, while fiscal policy decisions are ultimately still made at the national level, joint liability has been considerably expanded. this imbalance, however, undermines the idea of individual fiscal responsibility, and with it, the