as a surprise to some market players. the interest - rate increase was danmarks nationalbank's reaction to considerable outflows of foreign exchange and brought the foreign - exchange flows back into balance. this tool will also be wielded in future when made necessary by the foreign - exchange conditions. the mortgage - credit institutes and the rest of the financial sector are in good and profitable shape. this is among other things the result of strong activity in the housing market where low interest rates and other factors have pushed up prices and stimulated new construction. the prices of single - family houses have risen by 24 per cent in recent years. apartments have seen even larger price increases. greater copenhagen and the major provincial towns have accounted for the strongest price increases, implying an uneven distribution across the country. are the strong price increases signs of a price bubble about to burst? in overall terms that is hardly the case. the outlook of a continued high employment rate gives no reasons to expect housing prices to plummet. besides the favourable development in employment and real incomes, other factors explaining the price increases so far are low interest rates, new loan types, including deferredamortisation and adjustable - rate loans, and a strong preference for certain areas where the supply of housing is limited. a further factor is the freezing of property taxes, which has affected prices in particularly attractive areas where the progressive property tax has or would have an impact. despite the most recent increase, interest rates remain very low in both nominal and real terms. in view of the stronger economic outlook for europe and continued high energy prices the financial market generally expects interest rates to rise further in the near future. this will lead to lower housing prices than would otherwise be the case, perhaps even slightly decreasing housing prices, but for as long as the favourable economic development continues, there are no prospects of considerable large - scale price drops. as in so many other respects, this is by no means an open and shut case. a combination of considerably higher interest rates and unemployment could cause housing prices to fall more dramatically. at present this is not the most likely scenario, however. the very strong price increases for real property have generated substantial capital gains. if a major proportion of these gains is translated into consumption, there is an increased risk of the economy overheating. the possibility is there. in 2005 the housing wealth of the households rose by approximately kr. 500 billion. in comparison, private consumption totalled approximately kr. 750 billion. the real property of

##fond ( amortisation fund ), which met the enthusiasm of the european union. what do you think of it? it doesn ’ t change our assessment that it is legally not feasible and that it inverts the sequencing of liability and control. in practice, it backs the guarantee for all debt over 60 % of gdp, assuming that everybody sticks to the rules and pays back his part of the debt later on. but we have seen in the past how flexibly our rules were interpreted. and i think mutualising debt by only hoping the rules are adhered to is very dangerous. all this requires constitutional change. but germany cannot be completely isolated from the rest of the eurozone. we carry the largest burden of the rescue packages, which all benefit from germany ’ s aaa rating. so germany is the stability anchor and without it, it wouldn ’ t work. and it is assumed that it is germany ’ s responsibility to do that. so it is all too easy to say that germany always says “ no ”. that ’ s why it is unjust to say that germany doesn ’ t play a constructive role. but the problems between germany and france on the interpretation of how to go on, can endanger the euro? well, first of all let ’ s wait for the electoral noise to fade. and then we will see how the collaboration really works. my point is that you have to be realistic about the solutions. and if you only talk about eurobonds without talking about control, then this will just distract attention. if france were to start a debate about giving up national sovereignty, this would really move the debate forward. the german government is now pushing for fiscal union, trying to find a solution. i would very much welcome it if president hollande faced this debate and discussed both common liability and giving up sovereignty – and the path towards this new political union. but just asking for eurobonds doesn ’ t get us anywhere. bis central bankers ’ speeches in order for the greek debt to be sustainable, economists say that there will need to be a haircut of the official sector too. the peak of the greek debt is still to come and it will take a very long time to bring it finally to a sustainable status. but here i have to rely on the debt sustainability analysis that has been carried out by the troika. economists say behind spain there is italy, we have to stop contagion, so that ’ s why everybody is happy that spain agreed