about the question of who decides about solidarity and what it means for the stability of the single currency. in my view, it has to be democratically elected parliaments who decide about redistributing wealth or risks. besides, we could run the risk of suffering from the tragedy of the commons in which monetary policy would become a shared resource that would be overused. and this is not just a theoretical consideration. it is something of practical relevance when it sets the stage for a discussion about the independence of central banks. and such a discussion has begun. joseph stiglitz recently claimed that : “ the notion of the desirability of an independent central bank was predicated on the belief that monetary policy was a technocratic matter, with no distributional consequences. ” from this he concludes that : “ the crisis has called into question the notion of independence ”. japan provides a real - life example of a central bank that has come under political pressure. i must admit that these developments worry me. they worry me because theoretical considerations as well as historical experience contain one central message : independence and a focus on price stability are crucial for successful monetary policy. central banks should not find themselves dancing too closely with fiscal policy. to paraphrase one of my predecessors : if you dance too close with fiscal policy she will marry you. and the offspring are usually higher inflation and reduced fiscal discipline. bis central bankers ’ speeches and here, i am not even referring to the german experience of the 1920s. we just have to look back to the 1970s. in these years, inflation rates in countries with independent central banks were comparatively low. while average inflation in germany stood at 5 %, it reached as much as 14 % in italy and 15 % in spain. or think of the french experience of the late 1980s. in 1993 the banque de france became independent and jean - claude trichet introduced his policy of the “ franc fort ”. only then did inflation rates decrease from an average of nearly 4 % to less than 2 %. so, if we care about stable prices and if we care about purchasing power then we should be worried. we should be worried because on the european dance floor monetary and fiscal policy are moving toward each other. think of greece : while governments hesitated to disburse the next tranche of loans, monetary policy stepped into the breach. nevertheless, we should not overburden monetary policy with the task of solving a crisis that it cannot solve anyway. the price would be too

however, in the current situation we need to recognise that we are faced with a crisis of confidence. there has been a partial loss of confidence in our fiscal rules as well as in the will of european countries to consolidate their public finances. moreover, there is the criticism that deficit targets may, in fact, become a moving target. in such an environment it is in my view particularly important for the heavy weights in emu to give clear signals, which boost the credibility of the fiscal rules and agreements in emu and the credibility of their consolidation strategy. but coming back to the countries at the centre of the crisis, both remedies, consolidation and structural reforms, are hotly debated. 3. 1. consolidation vs growth regarding consolidation, many people fear that it will hurt growth. hannes swoboda, an austrian member of the european parliament claimed that : “ austerity measures won ’ t bring people out of the crisis. it is like giving poison to a man or woman who is sick. ” personally, i tend to agree more with christian noyer. he said : “ in the current circumstances facing europe, i believe these concerns are misplaced ”. i, too, believe that these concerns are exaggerated. it is indeed likely that consolidation will have a short term dampening effect on growth. however, to quote mario draghi : ” what ’ s the alternative? ” putting consolidation off would just shift the problem into the future. it would buy time but in so doing also worsen matters today as there is the risk that trust in public finances would erode even more. moreover, a widespread lack of trust in public finances weighs heavily on growth. a study by carmen reinhart and kenneth rogoff implies that debt levels above 90 % will reduce growth. i do not advocate a strict ricardian view here. i do believe, however, that peoples ’ concerns about increasing adjustment needs in the future will affect their spending and investment today. thus, it is important that governments adhere to the consolidation plans they announced. this will inspire confidence, which is an important prerequisite for the economy to grow. as jean - claude trichet once said : “ when you ’ ve lost confidence, when households have no trust, when businesses have no trust, when savers have no trust, then the best way to find growth and jobs is to recreate confidence. ” in my view, this is true not just for the countries at the heart of the crisis. a failure