over the medium term. this mandate must be adhered to both in normal times and in times of crisis. the monetary policy stance appropriate to fulfil our mandate depends exclusively on our assessment of the balance of risks to price stability, and nothing else. there is absolutely no reason to deviate from this approach during times of crisis. this being said, the ecb, in cooperation with other central banks, has shown remarkable flexibility in terms of liquidity provision. this flexibility was necessary in order to avoid the breakdown of the interbank market, which is a very important transmission channel for monetary policy. let me finally mention that our recent interest rate cuts were fully in line with our monetary policy strategy. with the intensification and broadening of the financial crisis it became increasingly clear that the upside risks to price stability were diminishing when the downside risks to economic growth in the euro area and elsewhere were materialising. this created room for cuts in interest rates, based on and fully in line with our monetary policy strategy. i can assure you that, looking ahead, we will continue to base our assessment and our actions on this strategy, which has served us very well over the past ten years. let me now turn to fiscal policies, an area that is of the utmost importance and one with which i am also familiar. similar to monetary policy, it is important that fiscal policy - makers in the euro area see the benefits of adhering to a kind of separation principle. fiscal policies in the euro area need to be committed to the long - term sustainability of public finances, also in times of crisis. does this mean that fiscal policies should remain inactive? no, but it gives guidance as to the kind of intervention that is appropriate for managing financial crises. the rescue packages recently enacted by euro area governments to stabilise the banking sector were clearly necessary, timely and well - targeted. the design of the rescue measures ensures that taxpayers in the euro area will not be burdened in the long run. there are, of course, downside risks to government budgets but there are also upside risks, suggesting that the net effect on the long - term sustainability of public finances could be very limited. short - term increases in government debt associated with these rescue measures are to be accepted. however, the more recent plans of euro area governments to set up discretionary expansionary measures to stimulate the economy at large are totally different in nature. there is a substantial risk that the mistakes of the 1970s will be repeated

was that a market economy can only flourish in a sustainable manner if certain timeless principles are adhered to – and, importantly, all at the same time, because of what he called “ the interdependence of orders ”. let me enumerate these principles : • the primacy of price stability ; • the promotion of perfect competition on all markets ; • the protection of property rights ; • the freedom of contract ; • unlimited liability ; and, finally, • stability - oriented economic policies. moreover, there is an “ interdependence of international orders ”, suggesting that these principles should be adhered to around the globe. at the time of writing his book, eucken could not foresee the recent wave of globalisation and rapid financial market integration, which has reinforced the need to account for this international interdependence. have all these principles been adhered to properly in the run up to the current crisis? my answer is a clear “ no ”. before elaborating on this answer, let me briefly mention that the school of thought eucken belonged to – which has been called “ ordoliberalism ” by some and “ german neoliberalism ” by others ( at a time when “ neoliberalism ” was not yet a swear word ) – is very different from both state interventionism and laissez - faire capitalism. while eucken recognised that activist economic policies are a major source of distortion and should therefore be avoided, he still saw an urgent need for government action in the field of establishing the rules. in the absence of such rules, private agents would have the incentive to undermine the disciplining forces of free competition. i will now turn to the origins and causes of the financial crisis and i will show how valuable eucken ’ s insights are for understanding the genesis of the crisis and for devising preventive measures. 2. diagnosis : the origins and underlying causes of the financial crisis as regards the origins and underlying causes of the current financial crisis, i will focus on three aspects : the role of macroeconomic policies, the role of microeconomic policies including regulation and the role of financial market participants themselves. i can be brief because much has been said on these aspects over the past months. first, turning to the role of governments, it is clear that expansionary macroeconomic policies around the globe have contributed to the build - up of macroeconomic imbalances. these policies have facilitated the strong credit expansion,