lead to a competitive advantage in the internal market. equally, banks in these countries have a greater potential to increase their profitability. to avoid such national fragmentation, eu - level initiatives that support the recovery play a very important role. at the same time, deteriorating economic conditions may give rise to debt sustainability concerns in the medium term, notably in countries with already limited fiscal space. the increase in public debt levels, while necessary today, needs to be managed in the medium term. the shape and strength of the recovery are uncertain and this uncertainty will persist for some time. there are substantial downside risks, in particular if the easing of containment measures turns out to be premature or their impact on productive capacity is more persistent. macroprudential policy can play an important role in safeguarding the resilience of the system and supporting the recovery. regulatory capital buffers were designed to be used, or drawn down, in periods of stress. banks that use their buffers are acting in line with the intended functioning of the framework and in accordance with authorities ’ expectations. by using buffers now and avoiding excessive deleveraging that would be harmful for the economy, banks help reduce losses later. turning to non - banks, european - wide supervision of capital markets and a macroprudential framework for the sector is needed. this would help mitigate system - wide liquidity risks, reduce the sector ’ s vulnerability to turbulence in financial markets, and thereby reduce the need for ex post policy interventions. a resilient financial system is essential to support the recovery, address inevitable pressure on bank profitability and reduce overall vulnerability to market volatility. accelerating progress towards the capital markets union remains a priority, as does completing the banking union. this would help ensure access to funding for a wide range of firms, support a level playing field and counter fragmentation along the path to recovery. 4 / 4 bis central bankers'speeches

jens weidmann fears that the ecb ’ s monetary policy is financing fiscal deficits. draghi : no, the governing council disagreed with that view. what has been decided is a monetary policy measure. there is a fundamental difference between buying on the primary market, which is forbidden because the money would go to the government, and buying on the secondary market where the money does not go to the government but to bond holders. article 18 of the statute states that the ecb may “ buy and sell [ … ] marketable instruments ” as part of its mandate, if necessary to achieve price stability, of course always respecting the treaty ’ s article 123 on the prohibition of monetary financing. sz : where does the german opposition come from? draghi : it comes from the history of the country and the fear of inflation. but it has to be clear that in the case of efsf / esm support, the parliaments of the euro area countries will be involved. sz : but the parliaments do not decide on the amounts that the ecb is going to risk … draghi : no, because monetary policy has to remain independent, and it is a prerequisite for the governing council to consider the specific monetary policy measures. sz : many germans were against the euro, because they had doubts about the economic policies of countries like greece or italy. now they feel that they were right. draghi : the euro has delivered price stability to an entire continent. it has removed exchange rate risk, fostered economic cohesion, employment and growth. germany has benefited greatly from all these accomplishments, as well as from price stability that is greater than in the years before the euro. sz : the ecb will be getting even more power by supervising the european banking industry. so, will the ecb always bail out ailing banks by printing money? draghi : no, we have to organise ourselves and keep banking supervision and monetary policy strictly separate. this has been done in many central banks. we are not mixing anything ; fundamentally, there will be a chinese wall. sz : chinese walls in regular banks have collapsed. draghi : not in central banks. sz : how can the ecb do a better job than the german bafin? draghi : it is not about doing a better job ; it is about making sure that uniform supervisory practices are applied across the whole single currency area. the more detached you are from national government, the more objective you