include those of kydland and prescott ( 1977 ) and of barro and gordon ( 1983 ). these studies argue that, in the short term, there is the temptation for monetary policy to exploit a seemingly existing trade - off between employment and inflation through expansionary policy measures. in the long run, however, there is no such trade - off because, given the adjustment of inflation expectations, these measures would be systematically anticipated and would thus be rendered completely ineffective. the outcome would simply be higher inflation without any benefits to employment or growth. the ecb ’ s mandate and its independent status are laid down in the european treaties. these treaties were ratified by democratically elected parliaments in all member states and, in some countries, by referenda. the core elements of the monetary union – namely price stability as the primary objective of monetary policy and an independent central bank – have remained unchanged in each of the treaty revisions since first laid down in the maastricht treaty in 1992. accordingly, they were reconfirmed and re - legitimised through the ratification of the lisbon treaty by now 27 eu member states. the members of the ecb ’ s decisionmaking bodies are appointed by democratically elected politicians. in addition, provisions are in place in order to ensure the personal independence of individual monetary policy - makers. for example, the term of office for members of the executive board of the ecb is limited to eight years, and is non - renewable. together, the treaty - enshrined foundations of the monetary union combine the ecb ’ s independence with clear, democratic legitimation. price stability is in the acknowledged, very best long - term interests of the people. stable prices benefit society as a whole, rather than serving individual interests. price stability guarantees the purchasing power of income and the value of savings. it prevents arbitrary redistribution and fosters employment and growth. only when prices are stable is the price mechanism – the key tool for managing supply and demand in a market economy – transparent and efficient. these findings also have a strong tradition within german economic science. walter eucken ( 1952 ), one of the spiritual fathers of what is known as “ ordnungspolitik ” and the social market economy, rightly described price stability – as he put it at the time, the “ primacy of foreign exchange policy ” – as one of the constitutive principles of a competitive order. he envisioned a “ monetary constitution with a stabilis

##er for monetary value ” that would avoid both inflation and deflation, and would function “ as automatically as possible ”. the eu ’ s monetary constitution reflects a consensus on stability among economists that has developed in europe over many decades. with its constitutionally guaranteed independence, the ecb acts as a stabiliser of the value of money. there is no completely automatic guarantee of a stable value of money, but the clear commitment to the primary objective of maintaining price stability acts as a compass in all decisions relating to european monetary policy. in democracies, certain tensions between independent central banks on the one hand and governments as well as economic and financial pressure groups on the other hand, do arise from time to time. given agents ’ varying time horizons, these tensions are part of the nature of the issue at hand. the deutsche bundesbank and its predecessor, the bank deutscher lander, were repeatedly subject to criticism. an early example thereof is the well - known speech by adenauer in 1956, when he branded an increase in interest rates as a “ guillotine for the man of the street ”. the ecb itself cannot claim to have been lacking advice from the political sphere. it joins a long tradition of independent central banks in this respect. several euro area governments criticised the ecb when it decided not to decrease interest rates in 2004 and to raise them at end of 2005. with the benefit of hindsight nobody would now question that the decisions of the time were appropriate. the exemplary nature of the cases cited is also revealed by the fact that criticism almost always arises in response to restrictive monetary policy measures. expansionary measures, by contrast, are virtually never criticised. this, too, reflects the differences in the time horizons envisaged by independent central banks, on the one hand, and executive branches as well as pressure groups on the other. looking ahead, the financial crisis has created considerable challenges for monetary and fiscal policy. from the very outset, the monetary policy measures taken by the eurosystem during the financial crisis were specifically designed in such a way that they could be phased out relatively easily and gradually once the environment improved. the goal of maintaining price stability never changed, and meanwhile the unwinding of these measures has started. the situation in the field of fiscal policy is more complicated. budget deficits in many countries across the globe have grown substantially on account of the crisis, although the euro area ( in terms of the average deficit across member states ) did not by any means