member states ’ largest creditor, thus further blurring the boundaries between monetary and fiscal policy to a significant extent. ultimately, the government bond purchase programme also means that all governments – regardless of their credit quality – can, in effect, fund a substantial portion of their debt very cheaply. as the central banks are only purchasing the government bonds of their home countries, the member states will recoup much of the interest payable on these instruments at a later date via central bank profits. that can, of course, ingrain certain habits and ultimately encourage countries to put the necessary consolidation of their public finances on the back burner. and that, in turn, could increase pressure on monetary policymakers to keep interest rates low for longer than necessary – even if monetary policy considerations would call for a rise in key interest rates. the mere impression that monetary policy is no longer centred around the goal of price stability could erode its credibility, and central banks would have to make great efforts to combat this. ultimately, deciding whether to make bond purchases is about weighing up which risks are more pressing. on the one hand, we have the risk associated with blurring the boundaries between monetary and fiscal policy, combined with possible financial stability risks caused by very loose monetary policy. on the other, we have the risks to credibility caused by a phase of low inflation, which could engender the risk of a self - reinforcing deflationary spiral. given that the oil price slump – the main cause of the low inflation rates – is temporary and is also acting as a stimulus for the economy as a whole, i consider the former risks to be more pressing than the latter at present. ladies and gentlemen, the world would be a far simpler place for the eurosystem ’ s monetary policymakers if economic growth in the member states were stronger. when potential growth is low, a central bank will soon start to run out of options – interest rates cannot simply be lowered ad infinitum into negative territory. one important reason why monetary policymakers have been forced to take ever riskier action is the weak growth outlook for the euro area. according to estimates by the european commission, 1 the euro area ’ s potential growth over the medium term – in other words, over the next ten years – is a mere 1 %. and weak growth prospects mean not only a european commission ( 2013 ), “ the euro area ’ s growth prospects over the coming decade ”, quarterly report on the euro area 12 (

549, pp 1175 – 1200. d andrews, c criscuolo ( 2013 ), “ knowledge - based capital, innovation and resource allocation ”, oecd economics department working papers, no 146. bis central bankers ’ speeches 3. 5 capital markets union differences in language and culture would suggest, however, that mobility in the european labour market will not be as high in the foreseeable future as in other currency areas. this makes it all the more important for other buffers to function effectively. even in federal currency areas such as the united states, canada or switzerland, this buffer function is performed primarily by the capital markets. in the usa, for example, the integrated markets for capital cushion around 40 % of total cyclical fluctuations between the us federal states. if a negative shock hits an industry or a specific region, then this loss is spread widely beyond the state. but in return, shareholders throughout the country also receive a share of the profits during the good times. when compared with the equity capital markets, the significance of the credit markets as a buffer is lower : around 25 % of cyclical fluctuations are evened out via the credit markets. fiscal cushioning mechanisms, however, are by far the least significant : only 10 % to 15 % of economic shocks are absorbed through public finances. 8 this last figure is similar in other federal systems. only in canada is the contribution considerably higher, at approximately 30 %. in terms of their performance, fiscal buffers thus correspond more closely to the traditional leaf spring ; only integrated capital markets are capable of providing the cushioning comfort of modern air suspension systems. here, the equity capital markets, in particular, are an essential component. 4. the fiscal framework although the role fiscal adjustment mechanisms play in absorbing asymmetric shocks appears to be limited, fiscal policy remains at the centre of the debate on the euro area ’ s future development. this is related to the incentives for running up debt mentioned earlier, created by the combination of a single monetary policy and national fiscal policies. as long as fiscal policies remain in national responsibility, the member states also need to bear the consequences of their policies themselves. otherwise, incentives will be created to engage in unsound practices. the rescue measures taken during the crisis prevented any further escalation of the crisis and stabilised the euro area in the short term. however, elements of joint liability have also increasingly been introduced as part of these measures, while fiscal policy has remained a matter for national