that german reunification could trigger optimism at home but anxiety abroad. you knew that the best way for germany to demonstrate the strength of its historical responsibility to europe was to share a currency with its neighbours. at the same time, a single currency would safeguard the single market against the risk of competitive devaluations. so we can be thankful that, when the crisis erupted, you were once more in a position of influence. you reminded us that the euro has always been more than just a currency, and your unyielding defence of europe was a bulwark in those febrile times. this is best captured in your belief that “ if a solution is good for europe, it is good for germany ; and if something is bad for europe, it cannot be good for germany. ” 1 of course, there have been different views about what constitutes a “ good solution ” for europe, such as the appropriate balance between sharing risks and reducing risks. 1 / 3 bis central bankers'speeches but i was always struck by the fact that, once you had agreed a way ahead with your european partners, you defended it with conviction. i know that this was not easy : you had to tread a careful path between maintaining confidence in the euro at home and making the necessary reforms to safeguard the single currency. the fact that 81 % of germans back the euro today, and the euro is more popular than ever among the wider european public, is testament to your skill in navigating that course. 2 what allowed you to achieve this was your second quality : your intellectual rigour. i have had many occasions to observe your forensic mind at work. you combine the subtlety and foresight of a statesman with the scrutiny and attention to detail of a tax lawyer. you are notorious for your ability to pick apart shallow arguments and for your intolerance of superficiality. your brilliant mind has often put you at the forefront of european debates. in the 1990s you were already writing about how to build a more deeply integrated european framework around the countries that would go on to share the single currency. 3 you understood very early on that a monetary union comprising different sovereign states can only be sustainable if there is mutual trust. and you realised that trust does not emerge through declarations or treaties : it is built through actions that demonstrate the commitment of states to abide by the promises they have signed up to. you saw, in other words, that rules are not an end in themselves. i have so often heard you

future liabilities of the social security system, an expansionary fiscal policy and the concomitant widening of the deficit may not have a positive effect on economic activity, even in the short run. in such situations, see robert gordon “ two centuries of economic growth : europe chasing the american frontier ” ( http : / / faculty - web. at. northwestern. edu / economics / gordon / 355. pdf ) for comparisons of productivity growth rates and living standards between the european union and the us. households and investors are likely to adjust their own spending in view of the perceived inevitable need for the government to reverse the fiscal stance in the future. sound public finances are beneficial for the economy for several reasons. in particular, because they sustain consumer and investor confidence and thus contribute to growth and employment. furthermore, a credible and respected fiscal policy framework is all the more important in a monetary union. in the stability and growth pact, the eu has given itself such a framework. if we - the governing council of the ecb - are now insisting that the rules should be fully abided by and implemented in every respect, this is not out of a mere concern for procedure. of course, fiddling with procedures and timetables can harm the credibility and public acceptance of the pact. what has not been sufficiently emphasised, however, in the public debate is the economic rationale behind the pact. let me elaborate : in a large single currency area, unsustainable fiscal policies and excessive deficit financing in one country can become more tempting, since the “ punishment ” in the form of higher interest rates is spread over all member countries and might be imposed with some delay. the temptation to “ freeride ” and the associated negative externalities it implies for all other member states need to be limited by a set of rules effectively discouraging excessive fiscal laxity. the current debate about a more flexible “ interpretation ” of the provisions of the pact can damage the credibility of the overall economic policy framework in the euro area. moreover, part of this debate is beside the point. the pact already allows for considerable flexibility in the conduct of fiscal policy and in the application of the pact ’ s rules. the pact does take into account that national budgets also need flexibility to adapt to the economic situation, especially since the single monetary policy has to focus on price stability in the euro area as a whole. such flexibility is best provided via the so - called automatic stabilisers : revenues and spending can vary in a proportion