be dealt with under the sgp. however, we should refrain from macro fine - tuning – be it at the european or at the national level. such efforts would definitely overburden economic policy and raise expectations that are bound to be disappointed. instead, reasonable macroeconomic surveillance should confine itself to the early detection of harmful domestic imbalances that have significant negative spillover effects on other member countries or even the euro area as a whole. this in principle also precludes the symmetric treatment of current account surpluses and deficits : divergences within the euro area were caused by distortions and the inefficient use of capital in deficit countries. hence, the brunt of the adjustments has to be borne by these countries, whereas – as studies demonstrate – additional stimuli by surplus economies would do little to ease this burden. at the current juncture, the fundamental characteristics of the macroeconomic surveillance procedure are still very vague. in my view, the details need to be worked out first. only once this has been done, can we decide whether it makes sense to complement the procedure with sanctions and what these sanctions might look like. 4. conclusion ladies and gentlemen, the economic and financial crisis has demonstrated that there is ample room for improvement and need for reform in our financial system as well as in the area of eu governance. a look at the global agenda shows that the main messages that the crisis has taught us seem to have been understood. as the recovery proceeds, it is of the essence not to relent in our efforts to implement the necessary measures. if the momentum for structural reforms in the various fields of economic policy can be maintained, we will have made significant progress on the path towards strong, balanced and sustainable growth. thank you for your attention.

reform measures aim to tighten capital requirements, both in terms of quantity and quality. the significant enhancements made to the original basel ii framework will lead to a new set of rules that has therefore rightly been termed basel iii. after the promising consensus achieved at the summit in seoul, the task is now to transpose the g20 agreement into national law. of course, the increased requirements are associated with adjustment costs for financial institutions. yet, a number of studies have been conducted. the investigations have shown these costs to be manageable, not least due to the lengthy transition phase that will attenuate the adaptation process. even the distinctive features of the tripartite german financial system have been taken into due consideration. the sector ’ s profitability will probably decrease, yet so will fluctuations, thereby supporting continuous growth. impacts on cost of credit and thus on the real economy will, however, be limited. fears of dire consequences therefore appear exaggerated, and banks should instead embark on the task of adjusting to the new requirements at an early stage. however, the increased risk buffer in the shape of higher capital requirements is no panacea. it is a central lesson from the crisis that a second line of defence is needed to prevent individual banks that still fail from triggering a systemic crisis. this issue is particularly acute in the case of systemically important financial institutions ( sifis ). the discussion of how best to treat them is still ongoing, but the contours of the future framework are taking shape now that the g20 summit has endorsed the fsb ’ s sifi recommendations : a core policy instrument are resolution regimes that are tailored to the particularities of the financial system and that allow to resolve even systemic financial institutions without endangering the functioning of the financial system. higher capital requirements in a variety of forms are a suitable instrument to increase the loss absorption capability of sifis and, at the same time, to counter moral hazard by pricing in their externalities. however, important details of these sifi recommendations and corresponding policy measures still need to be agreed on, and some questions remain unanswered. one important issue is how to measure systemic relevance and how to translate this into regulatory and supervisory action. the crisis has also demonstrated that systemic risks have been shifted out of the regular and therefore regulated banking sector into the so called shadow banking system. this underlines just how important it is to complement traditional microprudential institutional supervision by macroprudential oversight. yet for this new