than unconventional monetary policy directed at providing liquidity support to the banking system in collateralized operations. in my view, one particularly nice feature of the bulk of ecb ’ s unconventional monetary policy measures concerns its “ natural ” or “ embedded ” exit. this makes the ecb less sensitive to political pressure than in a situation in which it would have to make an explicit choice for unwinding. for instance, one of the key elements of the ecb ’ s response to the intensification of the sovereign debt crisis was the design of the longer - term refinancing operations or ltros. these ltros ensured that banks had sufficient liquidity over the medium term, while at the same time embedding phasing - out as a design feature. or in other words, the exit was taken into account up - front. fourth, the ecb should be clear about the limits of monetary policy and manage expectations of what it can achieve. this is important because central banks are – undeservedly – considered to be the only player with room for maneuver and therefore subject to unreasonable expectations of what monetary policy might achieve. these expectations should be downplayed to avoid disappointment with the public and the political pressure that might follow. in particular, the ecb should stress that the problems in the euro area are not problems that monetary policy can completely solve, as they are rooted in weaknesses in banks ’ balance sheets, weak government finances and supply side rigidities in many economies. all the ecb could do is provide “ breathing space ” for banks and governments to act, and it has done so. fifth point, at the same time, the ecb should try to sustain or provide the right incentives to governments and banks. as regards governments, sound public finances are an important underpinning of central bank independence. conducting an independent monetary policy is made significantly more difficult in the event of large budget deficits. a similar story could be told for labour and especially product market reforms. that is why i very much argued for and welcomed the explicit conditionality in the form of an esm programme in the outright monetary transactions scheme. this ensures that governments make the necessary efforts to restore the sustainability of public finances, reform of the supply side of their economies and in doing so contribute indirectly to central bank independence. for banks, such conditionality hasn ’ t been used so far. however, given that it is very important to provide the right incentives, it might be worthwhile to explore whether

realise a substantial rise in productivity. if markets function properly, the chance of that increase materialising will be greater. let us hope that the implementation of the kok committee proposals for structural reforms within the scope of the lisbon agenda will get off the ground. conclusion considering all this, how are we to look upon exchange rate fluctuations? what it amounts to in simple terms is that highly integrated economies forming, so to speak, one economic block, benefit from fixed exchange rates. economies that differ widely from each other and do not interact much, profit from mutually flexible exchange rates. admittedly, exchange rates sometimes tend to move too uncontrollably, creating a breeding ground for speculation. but if exchange rate changes arise from structural factors, we should welcome them. it is satisfying that these days there are fewer complaints about the euro exchange rate than before. at the macro level, this is appropriate. rather than with the rock - bottom level seen several years ago, the current level of the euro / dollar rate should be compared with the average level over a prolonged period. to assess our competitive position, it would therefore be better to take the exchange rates with all trading partners into account and correct them for mutual inflation differences. this so - termed real effective exchange rate of our currency is now 8 % above the average for the period 1980 - 2000. moreover, there is little reason to complain about the euro exchange rate as its consequences are not that overwhelming. to the extent that the netherlands is a small, open economy, the vast majority of its trade is confined to countries that also calculate in euro. on a corporate level, some operations are obviously sensitive to the exchange rate. they must adopt strategies that anticipate the adverse effects of exchange rate fluctuations. this is just what they are doing. the german car manufacturers bmw and mercedes are cases in point. and judging by the parking area outside this building, they are successful enterprises. the fact that both costs and revenues would be expressed in dollar played a weighty role in their decision to set up production facilities in the us. with this move, both companies have covered themselves against exchange rate fluctuations in a natural manner. another much - used way to do so is by means of financial instruments. i suggest that we send the euro rate as scapegoat for wrong economic moves into the desert, just as happens in the jewish tradition at the time of the day of atonement.