were at the heart of the sovereign debt crisis. it would be unfair to only look at germany for this situation, as many serious policy mistakes were made in southern countries. first, several countries failed to implement the structural reforms that were needed to function smoothly in a monetary union. rigidities in product and labor markets contributed to severe losses of price competitiveness. second, several countries experienced booms in domestic demand on the back of unsustainable growth of credit and house prices. third, several countries failed to use the windfall of lower interest rates due to emu - membership for a lasting improvement of public finances. between the mid - nineties and the financial crisis, interest rate expenditure on public debt in the periphery decreased by 4. 5 % of gdp on average. only spain used this fully to reduce budget deficits. unfortunately, in the other countries, on average almost half of this percentage did not translate into lower deficits. these policy mistakes suggest that the burden of adjustment mainly lies in southern europe. but it would also be unfair to turn the crisis into a moral caricature between the virtuous and the profligate, between ants and grasshoppers. as jens mentioned in one of his recent speeches, several so - called core countries are not in great shape either. think of low bis central bankers ’ speeches competitiveness and high public debt in france. think of low productivity growth in the german service sector. and think of the painful correction of house prices here in the netherlands. this clearly illustrates that all emu member states need to carry out reforms to improve their economic growth potential. moreover, policymakers in all european countries made misjudgments regarding the functioning of emu. most didn ’ t see these flaws when we celebrated 10 years of emu, only months before the collapse of lehman brothers. at the time, we all failed to see how the growing importance of financial factors had fundamentally changed the monetary union. it wasn ’ t recognized that the euro area was experiencing asymmetric financial cycles rather than asymmetric business cycles. this is serious omission as recent research shows that these financial cycles are much larger and longer - lasting than normal business cycles. they created divergences that emu was not designed to deal with. in addition, we thought that the strong increase of financial integration after the introduction of the euro would enhance risksharing. but we didn ’ t realize that it also spurred contagion and pro - cyclical capital

at hand. in this way, the legitimacy of the court would be ensured, both towards the market and public stakeholders. public availability of awards a last important feature is the public availability of judgements. the creation of a body of decisions on standard terms used in financial transactions would improve legal certainty, thereby enhancing the stability of the derivative markets. yet, this goal would only be reached if the market would get to know the outcome of disputes and if the decisions rendered by the tribunal would be public. any reluctance of market parties to go public with their disputes can be taken away by making the court decisions anonymous. of course, different laws may be applicable to the relevant master agreements, and the regulatory regime in which the transactions take place may differ. however, if they are of a high quality and well motivated, the decisions may de facto be authoritative across the world by the power of persuasion of their content and the stature and prestige of the institution by which they are rendered. other initiatives : central counterparties the idea of an international dispute resolution facility for the financial markets fits well in a rapidly changing environment. both in the united states and in europe, central counterparties [ ccps ] for the central clearing of derivatives have been launched. ice clear europe for instance clears credit default swaps and swapclear is a ccp for interest rate swaps. this is a significant development, since for instance swapclear claims to clear currently more than 40 % of the global interest rate swap market, with a total notional principal of 229 trillion usd. central clearing by ccps not only mitigates counterparty risk, but also minimises the cash flows between counterparties. in addition, a ccp increases transparency, as it registers all transactions. also, ccps require daily collateralisation of open derivative positions which reduces the leverage in the financial system and contributes to financial stability. legislative initiatives it is not surprisingly, therefore, that the g20 leaders committed in september 2009 that all standardised otc derivatives should be cleared through ccps by end – 2012 at the latest. also, it decided that otc derivatives contracts should be reported to trade repositories. in the us this resulted in the dodd - frank wall street reform and consumer protection act. in the eu, the european commission recently proposed a regulation that creates a framework for the regulation of ccps and trade repositories. both the eu and the us regimes aim to impose clearing and reporting obligations on a broadly defined class of derivatives