cesee region for a cross - border coordination of macroprudential policies both in the home - host and in host - host directions in order to avoid regulatory arbitrage and to create a level playing field. while bilateral coordination may be sufficient in certain home - host issues, multilateral coordination seems to be superior in most of the cases and certainly in host - host coordination. as of today, however, the institutions for such coordination are not in place. supervisory colleges may come close, but they don ’ t have a macroprudential angle. the planned cross - border stability groups seem to be better suited for this purpose, but if they are organised according to banking groups instead of geographical areas with significant exposures to each other, they will probably not turn out to be efficient macroprudential coordination fora. it remains to be seen whether the soon - toturn - operational european systemic risk board ( esrb ) can serve as an effective coordination vehicle for cesee macroprudential policies. finally, allow me to make a precautionary warning against too much reliance on macroprudential policies in facilitating financial stability. in my opinion, although they are necessary, they certainly are not sufficient in themselves for this purpose. first, without sustainable macro policies ( fiscal in particular ) and price stability the financial system may easily find itself in trouble or may intermediate insufficiently. secondly, although its aim is to reduce system - wide risk, macroprudential policy in the end is a set of particular tools targeting particular problems in particular parts of the financial system. in other words it is not as general as monetary policy, which affects virtually all economic agents. if, for example, there is a long - lasting general tendency of increased ( and excessive ) risk - taking in the economy, macroprudential policy in itself can at best slow it down but cannot offset it goodhart, c. ( 2010 ) : “ how should we regulate the financial sector ” in “ the future of finance : the lse report ”. permanently. in such situations support from monetary policy, e. g. in the form of leaningagainst - the - wind behavior, is necessary. euro entry : our ultimate safe harbor or compulsory task prior to the crisis, it seemed a safe bet to assume, that euro entry brings stability and prosperity in the region, especially in central europe. arguments in this respect were based on three main results. first, there is a deep economic integration with core

the crisis. however, research has shown, 2 that they were instrumental in the resilience of countries with respect excessive capital inflows and sudden stops. in addition, differences in macro prudential policies in controlling capital flows helped somewhat mitigating excessive capital flows, but their effectiveness were very far from perfect. though the situation on financial markets consolidated somewhat in the last year or year and a half, i believe, that lower risk tolerance compared to pre - crisis levels will prevail in the next countries of central, eastern and southeastern europe. see for example bakker, b. b. and gulde, a. m. ( 2010 ) “ the credit boom in new member states : bad luck or bad policies? ” imf wp 10 / 130. few years. this is a natural consequence of global deleveraging, which takes several years after a financial crisis. 3 as is shown in several papers, 4 deleveraging means, that cesee countries in the post crisis world might rely on external financing to a lesser extent, than previously. unless these countries find more domestic savings to finance the catch - up process, real convergence will slow down. lower risk tolerance at the end of the day might lead to higher uncertainty, and higher volatility. lower risk tolerance means, that economic sustainability had become a key issue, and there are very few if any countries among cesee who are surely on a sustainable path. the closer is a country to a point where the sustainability of a country ’ s economic policy is questioned, the more sensitive it becomes to both global and country specific economic news. as a hungarian central banker, i had to learn this lesson already several years ago. we need economic policies that push countries towards sustainability. as already mentioned, on the fiscal side, sustainability requires tight policies, we have to decrease indebtness to levels, where countries do not become excessively reliant on external financing sources. as cesee countries are less developed than core europe – contrary to the traditional macroeconomics – the same level of government debt can not be afforded. as lower gdp / capita implies lower household wealth, the same level of government debt as e. g., in germany, would require much more external financing, hence external debt. this is also a lesson, you must learn from the hungarian case. tight fiscal policy also helps private savings to finance private investments, and hence we can avoid a slowdown in real convergence in a period of scarce external