banks ’ balance sheets. democratically elected politicians, ie parliaments and governments, should be the ones who decide whether liability risks should be mutualised. and it is important to remain within the bounds set by the european treaties when making these decisions. furthermore, monetary policy must be wary of playing second fiddle to fiscal policy as this could make it increasingly difficult for monetary policymakers to ensure price stability. as you are no doubt aware, the eurosystem resumed its purchases of euro - area government bonds in march this year, this time on a very large scale as it is planned that these purchases will continue until at least september 2016. unlike in the case of the previous purchase programmes, the national central banks are now restricting their government bond purchases to securities issued by their home country ; any profits or losses arising from the purchases are not distributed within the eurosystem. this approach does at least, to a certain extent, take account of the concerns that were previously voiced, also by me, in connection with the previous purchase programmes. and yet, these purchases still blur the boundaries between monetary and fiscal policy. after all, the eurosystem central banks are becoming the biggest creditors of their respective countries. that is why, in my opinion, government bond purchases are not a monetary policy instrument like any other and should therefore purely be used, if at all, as a contingency instrument. as a result of a difficult weighing - up process, i therefore took a sceptical view of the recent decision of the ecb governing council to purchase government bonds. nevertheless, i cannot deny that in 2015 we are now in a completely different monetary policy situation than we were at the beginning of the sovereign debt crisis back in 2010. we are not expecting very dynamic price developments, also in the medium term, and interest rates have already been reduced to zero. our definition of price stability states that the inflation rate in the euro area ought to be just under 2 % in the medium term. however, much like at the beginning of the year when the most recent government bond purchase programme was adopted, the inflation rate currently stands at just above zero. this is due to the sluggish growth in the euro area, the adjustment processes in the crisisstricken countries and above all the sharp decline in crude oil prices. factoring this effect out of the inflation rate, price inflation currently stands at around 1 %. particularly, the dampening effect which the decline in energy prices is having on the inflation rate should be

, unfortunately. first, the fiscal rules of the stability and growth pact were tightened and a fiscal compact was agreed upon. the aim is for the fiscal rules to become more stringent and binding again in order to build confidence. second, a procedure for identifying macroeconomic imbalances at an early stage was established, in which the european commission regularly examines whether private sector debt or member states ’ current account balances, for example, are a source of harmful imbalances. third, a crisis mechanism was set up – a temporary one at first, then a permanent one – which is designed to serve as a “ firewall ”, safeguarding the stability of the financial system in the euro area. fourth, a banking union was resolved, introducing a single supervisory mechanism under the aegis of the ecb and a single resolution mechanism for ailing banks. after all, it had become clear that banks ’ difficulties have knock - on effects across national borders, but that national supervisors are all too keen to put on “ rose - tinted spectacles ” when it comes to “ their institutions ”. and fifth, financial market regulation was intensified. here, too, it was important to enforce the liability principle more rigorously once again. of course, merely putting stricter regulations in place is not enough ; these actually have to be applied. as far as fiscal regulations are concerned, a certain degree of doubt about the consistent implementation thereof is not entirely unwarranted. the leeway and discretion accorded for interpreting these regulations are immense and being used time and time again to delay budgetary consolidation. bis central bankers ’ speeches wolfgang schauble, germany ’ s finance minister, recently reiterated just how important it is for the european commission to strike the right balance between its political function and its role as guardian of the treaties. as a result of this double mandate, the commission often leans towards compromises to the detriment of budgetary discipline. by instead entrusting budgetary surveillance to an independent fiscal authority, the regulations could be interpreted more stringently. yet a stricter interpretation of the fiscal regulations alone is still not sufficient to safeguard sound public finances. we must also strengthen the disciplining function of the financial markets. the “ no bail - out clause ” simply lacks credibility. this is one key reason as to why there were next to no risk premiums on government bonds of highly indebted member states prior to the financial crisis. investors quite rightly assumed that the euro - area