together they account for a significant share – roughly 50 % – of lending to domestic enterprises and households. if those institutions were to run into difficulties, then, the repercussions for the economy as a whole could be severe. page 5 of 9 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. as these two examples show, the financial system needs to have sufficient buffers in the form of equity capital to be able to absorb even unexpected events, which can become mutually reinforcing in the system. the resilience of the financial system could be overstated german enterprises are better capitalised than they have been in a long time – the average capital ratio is 30 %, and interest payments on loans stand at just over 5 % of pretax profits. household debt as measured against disposable income currently comes to around 90 % and has remained virtually unchanged over the past few years, despite the low interest rates. the situation is less positive at the global level. at 144 % of gdp, private sector debt around the world is higher than its pre - crisis level ( 2007 : 125 % ). this trend is explained, not least, by increased leverage in the corporate sector, particularly in emerging market economies. however, low interest rates and a sound economic position mean that market participants could be taking an overly positive view of debt sustainability. take, for example, the german housing market. the real estate market in germany is important to the economy as a whole. lending for house purchase accounts for over two - thirds of household debt. more than half of all loans granted by german banks to non - banks are housing loans. experience in other countries has shown that if a real estate bubble accompanied by a strong build - up of household debt bursts, significant economic and social costs can come in its wake. we therefore keep a very close eye on risks to financial stability that can emanate from the housing market. what is particularly important here is the interplay between three indicators : • changes in real estate prices ; • the granting of loans for house purchase ; and page 6 of 9 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14

for a competitive economy : open markets, rights to private property, freedom of contract and the principle of liability, which i have already mentioned. he defines liability as an essential regulatory policy institution. in his “ principles of economic policy ”, he uses the example of an economic order with private property and a centrally bis central bankers ’ speeches controlled economy to demonstrate what happens when liability and control ( steering power ) drift apart. given the institutional framework of monetary union, this problem is still highly topical, and i shall revisit it later on. eucken names “ consistency of economic policy ” as the final constitutive principle of competitive order. he complains that economic policymakers suffer from a nervous restlessness, often today dispensing with those very rules that were in place yesterday. little has changed over time. eucken ’ s words still ring true regarding current economic policy measures in berlin. the introduction of a statutory minimum wage of €8. 50 to be applied across the board launches a large - scale macroeconomic experiment which, if applied as intended, may endanger the labour market success of recent years. and the pension package will go back on some previous pension reforms and create incentives for early retirement, thwarting the necessary extension of working life given an ageing population. such a policy will place an additional burden on future generations but, as groucho marx once said, “ why should i do anything for posterity? what has posterity ever done for me? ” while the ordoliberals of the freiburg school stressed the importance of ordnungspolitik ( translatable as regulatory policy ) and mostly rejected intervention in economic processes ( such as introducing a minimum wage ), the founding fathers of the social market economy saw a need for government economic policy over and beyond this framework. however, economic policy should be in line with the market mechanism and comply with the principle of subsidiarity. the principle of economic policy in line with the market mechanism and the principle of subsidiarity, borrowed from catholic social teachings, are thus likewise to be seen as the founding principles of our economic order. thus, market economy principles have not just shaped the economic system in germany, but are also major pillars of european integration. a constitutive principle of european economic integration was, and still is, non - discrimination against external providers of goods and services. the four fundamental freedoms of the single market are the result of this principle and are sum