. making exceptions for a large number of countries simultaneously undermines the disciplining effect of the fiscal rules. see feld et. al. ( 2013 ). bis central bankers ’ speeches so it remains to be seen how, and to what extent, the new stability and growth pact will actually reinforce fiscal discipline. perhaps enshrining debt brakes in national legislation, as envisaged by the fiscal compact, can provide a further impetus in that direction. 4. conclusion ladies and gentlemen, the crisis may be widely dubbed the “ sovereign debt crisis ”, but excessive public sector debt was not its only cause. a lack of competitiveness on the part of some member states, and excessive developments in the banking sector also played a decisive role in bringing about the crisis. but if i were to now discuss the macroeconomic imbalance procedure which was set up in response to the excessive economic misalignments, or the banking union, i would take all evening. that ’ s why i have confined my speech to just a few aspects of the regulatory framework, not least because these are precisely the areas in which switzerland can offer valuable insights into how existing weaknesses can be rectified. while it is true that not all the components of switzerland ’ s fiscal federalism can be transposed to the euro area, the concept at the heart of the swiss model – striking a balance between control and liability – can, and should, offer us some guidance for reforms in the euro area. restoring a regulatory framework that can stand the test of time is a challenging task. but i am certain that we will only bring about a more stable monetary union once this task has been overcome. or, as winston churchill once aptly put it, “ difficulties mastered are opportunities won ”. thank you for your attention. bis central bankers ’ speeches

have no capital backing for these government bonds ; their risk is also concentrated in just one country. this will need to change to give credence to the no bail - out regime. the bottom line of national responsibility is that sovereign insolvencies and insolvencies of large banks should also be possible without jeopardising the stability of the european financial system as a whole. the tightened capital rules for banks, which are designed to enhance financial sector resilience, naturally also contribute to achieving this goal. so this is another area in which basel plays a crucial role. but this time, it is basel iii which i am talking about. no less important is a stricter supervisory regime like the one which europe is looking to achieve by establishing the banking union. but even a credible no - bailout regime will only have the intended disciplining effect when doubts begin to emerge over a country ’ s fiscal soundness. that is why it is also important to combat the particular incentives inherent in a monetary union to run up debts – a goal which the monetary union ’ s founders had originally sought to achieve – so that things don ’ t get out of hand in the first place. hence the need for effective fiscal rules. switzerland has a wealth of experience in applying fiscal rules. its national debt brake has been up and running since 2003, since which time debt has roughly levelled off, and the debt ratio has been on the decline. but we can glean more detailed insights from the cantonal fiscal rules, which are now in place in nearly all the country ’ s cantons. available research reveals that stricter cantonal debt brakes also prove to be more effective. 3 bearing this in mind, a rule allowing potential sinners to pass judgement on actual sinners would have little prospect of success. the euro - area member states have already tightened the groundrules by rolling out the revised stability and growth pact and the fiscal compact, making it much more difficult now for finance ministers to turn down the commission ’ s recommendations. so it is now mainly up to the commission to make the next move. the first time the commission applied the new rules, it showed itself to be very elastic, granting spain, france, slovenia and cyprus longer deadlines to make adjustments than those actually envisaged in the stability and growth pact. i believe that such exemptions should be made only in well - founded exceptional cases. for this ultimately weakens the structural consolidation requirements and pushes them into the future