to fail to internalize these positive externalities. this could lead to national macroprudential policies that are overly passive and dangerously weak at preventing the future global financial crises. let me elaborate a bit on this idea. consider a strong upturn of an international financial cycle, during which asset prices climb rapidly, leverage increases excessively and prices of risk decline simultaneously in many countries with interconnected financial markets. this scenario of course resembles the developments in the years preceding the latest global financial crisis. to prevent these risks from materializing into a systemic crisis, national authorities should tighten their macroprudential policies and possibly other economic policies. now, consider the decision - making problem of a macroprudential authority or body in an individual country. this authority may find it difficult to tighten the national macroprudential policy for two reasons. first, there is the well known problem of “ taking the punch bowl away in the middle of the party ”. it has been pointed out that this political difficulty is likely to be even worse in the macroprudential context than in terms of monetary policy : there is at least some constituency that dislikes inflation, but probably none that dislikes the intoxicating feeling of getting richer as asset prices climb higher. second, as i mentioned earlier, a country that tightens its macroprudential policies in isolation would internalize only a part of the financial stability benefits of macroprudential tightening while bearing all the perceived costs in terms of a loss of competitiveness for its financial industry. this may lead to a first - mover disadvantage problem, where no country is bis central bankers ’ speeches willing to be the first to tighten its macroprudential policy unless it knows that other countries are committed to doing the same. unless properly addressed, these disincentives to pursuance of active national macroprudential policies may lead to a bad equilibrium, where global macroprudential policies become stuck in an overly passive stance. this implies that the identification of effective macroprudential instruments – which in itself is a formidable task – does not guarantee that these instruments will be used efficiently. what can we do to avoid this bad equilibrium? i have three suggestions. first, to relieve the extensive political pressure not to take action, we should try our best to develop and improve rules - based macroprudential policy. instruments such as dynamic loan loss provisions used in spain and the capital conservation buffer of the basel iii framework, could work as automatic stab

. 21. one of the challenges the ecb has to deal with is that the cycles in the eurocountries are different. what can be said to those countries like ireland, spain and portugal who are in a difficult position now and for which the rate hikes are painful? the ecb has to care for the superior interest of the euro area. my message to the fellow citizens is that they share a common destiny with an entire continent as populated as the united states of america. when we look at the differences in growth between states and countries in the us and in europe, we have approximately the same level of differences. a large vast continental economy has necessarily to give breathing space to its components. and our monetary policy must be optimal at the level of the whole euro area ; exactly like the fed would not look what is in the interest of missouri, california or texas. that being said, there are numerous aspects of economic policies which are under the responsibility of the countries themselves : in particular the fiscal polices, the structural policies and the surveillance of the evolution of unit labour costs. 22. portugal, for instance, has quite a low level of inflation. when the rate rises, people look at the ecb, but should they be looking at what their governments have done in the past in order to put them in a better position to cope with the difficulties that arise from the single monetary policy? firstly, in anchoring solidly inflationary expectations the ecb is preserving a financial environment which is favourable for sustainable growth and job creation. because all medium and long term market rates are lower, all things being equal, if inflation expectations are in line with our definition : less than 2 % but close to 2 %. secondly, as i said governments, parliaments and social partners have important responsibilities also because a lot of policies are within the competence of national authorities. 23. you intend to go to peking after the olympic games. what will be the message to china? we will see with our chinese partners, for whom i have great esteem, whether we meet in china or in europe. as regards our message it is well formulated : as we said in the communique of the last g - 7 meeting, we appreciate the rise of the yuan but we consider that an acceleration of the appreciation will be in the interest of all parties concerned. 24. to what extent does the appreciation of the real euro exchange rate and the future impact on euro area growth cause you disquiet? i