##worthiness on the interbank market, leading to possible shortfalls in their liquidity. it is precisely these aspects of deleveraging which are potentially fraught with problems. in an unfavourable scenario, a shortage of capital and liquidity causes banks to curb their lending even to enterprises who really have no need to reduce their debt on account of their financial situation. these enterprises then become the collateral damage of a disorderly deleveraging process, with matching consequences for the real economy and, thus, for growth and employment. what is crucial, therefore, is that such a process be conducted in an orderly manner. enterprises which have a functioning business model and which produce competitive goods or services must be able to go on funding their activities, while enterprises that miscalculated before the crisis have to reduce their debt. a good example of such an orderly deleveraging process is the strengthening of many german enterprises ’ capital base since 2000. above all, formerly insufficiently capitalised small and medium - sized enterprises used their increased corporate profits during this period to raise their capital base and reduce liabilities. overall, their capital ratio went up by 10 percentage points. in most cases, therefore, germany enterprises already have their deleveraging process behind them. and that is very much to be welcomed. for this process to succeed, three points were decisive. first, german enterprises ’ profits rose sharply during the past ten years, which made it significantly easier to build up capital. in other words, they made use of the cyclical tailwind in the last few years. second, enterprises became aware at an early stage that the stricter capital requirements under basel ii would mean them having to meet higher standards of creditworthiness. in many cases, an increase in equity capital meant that it was possible to avoid higher interest charges or less favourable credit standards. finally, tax law also gave a major boost to the greater accumulation of capital and reserves. the tax reform in 2000 removed the unfavourable tax treatment of reinvested earnings and created an incentive for retaining more profits. deleveraging yes, but not driven by a credit crunch : that is how a successful deleveraging process can best be summed up. central banks can support this balancing act – but only to a limited extent. it is true that, by providing liquidity assistance to the banks, they can ease tensions on the interbank market – which, as we all know, is something they do. but they cannot adjust balance

. this does not constitute a change of strategy ; it is an attempt to explain our monetary policy stance even more simply and clearly – so that it is understood ; if possible, by all market participants. it outlines our likely monetary policy response based on current data and the eurosystem ’ s two - pillar approach to analysing risks to price stability. it is not a historical sea change in monetary policy communication ; it is intended to provide more monetary policy guidance in times of heightened uncertainty. however, it is important to remember that this guidance is conditional on economic developments. it does not lay out an unconditional, fixed path for key interest rates. the ecb governing council has not simply tied itself to a mast like a modern - day ulysses. this forward guidance should not, therefore, rule out a timely rise in key interest rates if there are signs of increasing price pressures in the future. 5. conclusion ladies and gentlemen, aside from the acute crisis measures it is vital that we create a more stable monetary union. this won ’ t be easy to achieve. the current crisis has many different causes and combating it in the short term has taken a huge toll on the framework of europe ’ s monetary union. many different remedies will therefore be needed to find a lasting cure for this crisis. i have discussed some of these remedies in detail here today ; others i have only mentioned in passing. what many of them should have in common, however, is the aim of strengthening the no bail - out principle. this applies to banking and financial market regulation, the creation of a european banking union and the treatment of government debt in a monetary union. these are no easy tasks, and they sometimes involve a difficult balancing act – including for myself. but i promise that i will campaign forcefully and persistently to ensure that this promise is kept : that our currency, the euro, remains stable. thank you very much. bis central bankers ’ speeches