focal aspect of the discussion has been a close monitoring of the financial crisis in russia. as we all know, the russian crisis has added to concerns regarding the state of the world economy at a time when the crisis in asia is still ongoing and growth in japan is negative. these concerns have been fuelled by renewed strains in international financial markets as well as sharp fluctuations and downward corrections in major stock markets. there is no doubt that these developments will have a dampening effect on the world economy. however, their precise impact is difficult to measure at the current juncture. on the one hand, economic and model - based analysis still suggests only moderate effects on prices and output in the euro area. this is due to the fact that, first, most of the crisis regions are quite small in economic terms, i. e. when compared with world gdp or their contribution to world trade. second, trade links between these countries and the euro area are also of limited size. third, the euro area itself is a very large economy, which is only directly exposed to variations in global trade to a certain degree. however, on the other hand, this analysis should not mislead us. we are perfectly aware that the risks associated with current global developments go beyond those effects which we can measure directly. in this respect one may think of indirect influences resulting from changes in confidence, saving and expenditure within the euro area. we have to take these risks seriously and analyse the situation soberly, but we should also not dramatise. let me now turn to the latest available data. these seem to indicate that economic expansion within the euro area has remained broadly on track, despite the worsening of the external environment. domestic demand remains strong, while the contribution to growth from net exports has declined. both private consumption and investment provided an important stimulus to the growth rate in the first quarter of this year. more up - to - date indicators point towards continued expansion in the second quarter, albeit at a possibly more moderate pace than in the first quarter. the outlook on consumption is supported by higher real earnings growth and declining unemployment, and is reflected in consumer confidence. the evidence for the corporate sector is perhaps more mixed. as compared to the first quarter of 1998, industrial production figures show a somewhat slower rate of increase in the period from april to may, but capacity utilisation has continued to increase and this, combined with low interest rates, should underpin investment. european commission survey data, such as confidence indicators and

against eurobonds and simple fiscal unification, but with the european stability mechanism and the planned banking union we are effectively creating something like common fiscal liabilities and common bonds, just with less transparency. arguably, the german mark was – from a monetary point of view – a rather well administered pan - european public good. after the euro, this public good became overconsumed. philipp bis central bankers ’ speeches bagus, sitting today here in this room, argues that the euro is a classical example of a “ tragedy of the commons ” from the start, and that the smaller and weaker countries therefore inevitably ended up racing to make maximum use of the commons for their own benefit at the expense of the rest, thereby destroying this shared asset. the german mark can indeed be viewed as a sort of public good that became the subject of decisions made outside the public sphere in germany and hence was fundamentally transformed. the average quality of the public good called monetary stability and good currency in the eurozone will very probably go down with the ultimate demise of the former european monetary hegemon. let that be a warning to those countries which have not yet signed up to the monetary integration project. the fall of the former hegemon is relevant not only for the current crisis, but also for the future of the monetary order in europe. and here i do not see any positive perspectives, i must bitterly admit. i am not saying that the euro has to collapse, but i am pretty sure that if it prevails, it will be a completely different currency implying completely different monetary conditions from what the germans in particular hoped for. and germany faces a tough choice – further integration or a perfect monetary order. this question is rather new and painful. the answer to it will influence all of us, i believe. so let ’ s wish them good luck. thank you for your kind attention. bis central bankers ’ speeches