one is to create a framework to manage crises, one will unavoidably face the question of how the bis central bankers ’ speeches costs are to be divided, and it is almost, if not completely, impossible to agree on this in advance. all crises are different. it may be possible to agree on how to act when the problem arises, for instance, who should negotiate and how. one can thus decide on “ ex ante preparations for ex post burden - sharing ”, but not on “ ex ante burden - sharing ”. given this, it is interesting to note that with regard to the ecb there is actually a crisis resolution mechanism in the form of an implied agreement on “ ex ante burden - sharing ”. it is written into the treaty on european union exactly how the national central banks should recapitalise the ecb if this were necessary. if the securities the ecb purchased were to fall in value so that the ecb needed more capital, it is thus clearly stipulated to what extent the different countries shall contribute. it may be because of this that some countries do not want to allow the ecb to buy government bonds, while others think it is an excellent idea. so, paradoxically, it may be the actual crisis resolution mechanism that in this case leads to a deadlock that risks aggravating the crisis. crisis management mechanisms equally important in the banking system let me now change focus from countries to banking systems. but both of the theses i mentioned earlier are the same : when cross - border integration progresses it is important – and profitable from society ’ s point of view – to create credible crisis resolution mechanisms in advance. but this is rarely or never done. one sometimes talks of europe ’ s “ financial trilemma ”. 9 we in europe want to achieve a continued financial integration and increased financial stability, but at the same time we want to retain each country's national sovereignty. the problem is that it is possible to attain two of the goals, but very difficult to attain all three. if we want to combine financial integration with continued national sovereignty over, for instance, supervision and crisis management, as we have done so far, it will be difficult to achieve meaningful financial stability – the crisis we are currently going through provides a good example of this ( figure 3 ). figure 3 financial stability financial integration national sovereignty if, on the other hand, we want to prevent cross - border crises and at the same time maintain national sovereignty, we must

must be in place and have credibility before the crisis breaks out. this makes the crisis easier to manage and one might even prevent it arising at all. it is probably the case here that politicians in the eu have helped increase market distrust because of the way they have handled the crisis. for example, it is understandable from a political point of view that they have wanted to force private lenders to write off their loans to greece. but from an economic perspective – and in the longer run also political – this is not such a good idea. this has meant that italy and spain have had to pay much higher interest rates than before – not primarily because one perceives a risk that italy and spain will be unable to service their debts, but because the market has become uncertain as to whether the politicians intend to take similar coercive measures here. if one suffers an acute crisis, whether one has created it oneself or not, one must consider carefully how it should be managed. if one has not created a credible crisis resolution mechanism in good time and does not manage to do so during the crisis, there is finally only one last resort, and that is the ecb. the ecb is the monetary union ’ s central bank and can do in a crisis what the union ’ s national central banks are unable to do. it can always create liquidity and buy securities as needed and therefore in principle it can also attain the same credibility as the bank of england has in the united kingdom. the problem is that the ecb does not have an indisputable mandate to do this, and that the eu member states have differing views as to whether it should be given such a mandate. the ecb should not save countries from making necessary adjustments in legislation and public finances, many quite rightly point out. but this also risks having the consequence that one refrains from the only remaining mechanism that can manage an acute crisis. obstacles to setting up crisis management mechanisms one reason why it appears difficult to set up clear frameworks for managing a crisis in advance is, as i mentioned earlier, that crises occur so rarely. “ there will be no more crises during my mandate period, ” a politician said to me after the swedish crisis in the early 1990s, when we were to discuss new crisis legislation. and he was right, of course. it took almost 20 years until the next crisis occurred, and by then he had left politics long ago. there is another important reason, particularly when several countries are involved. if