##or countries. obviously, it is not always easy to find a majority of voters ( taxpayers ) willing to shoulder the financial liabilities of another country. it seems that the citizens in the eu still do not identify themselves strongly enough with the – still relatively young – project of european integration to fully support unlimited supranational financial assistance to individual member states. in the end, we are still dealing with sovereign democracies in the eu and in the euro area. the heterogeneity of income levels within the euro area creates additional obstacles. solidarity among eu nations continues to be limited. as a result, in contrast to inter - regional transfers that we see in a number of fiscally federal countries, the eu seeks to overcome the present divergences in the euro area by providing loans subject to strict and controlled conditions, which supplement the general system of eu regional and structural funds. to the recipient countries this might seem to be an infringement of important aspects of their political independence. however, i do not see a credible alternative to the procedures developed in the context of specific aid programmes. but this leads us to the broader problem of the political legitimacy of eu and euro area action during the crisis, e. g. with regard to the role of external control of fiscal policy decisions by national parliaments or decisions regarding the operational structure of instruments like the efsf and the esm. of course, all these problems are part of the age - old question of how to combine relatively short - term election cycles with the need to ensure sustainable long - term economic growth. one traditional way of dealing with this problem is, for instance, requiring a two - third majority for certain decisions. in the eu, this is the case by including certain provisions in the eu treaty that are extremely difficult to change. in this context the ecb can be seen as the most independent central bank in the world, as its independence is enshrined in the eu treaties. however, in the current institutional structure of the eu it is still unclear as to who has the mandate – and obligation – to take binding decisions in economically difficult times like the ones we are currently experiencing. the current crisis has shown the need for close cooperation within the eu, but also a tendency of re - nationalization of important aspects of crisis management, where a number of actions are based on intergovernmental arrangements rather than community law. bis central bankers ’ speeches this is not the place to discuss these problems in more detail. but

overcome the dominance of national interests and create an even more strongly integrated eu. the debt crisis also reminds us of the importance of maintaining financial stability. banking crises have a strong potential for seriously harming the real economy. in order to reflect their probability and, if they occur, their negative real impact, the provision of sufficient liquidity and an adequate capitalization of the banking sector as well as mechanisms to facilitate the liquidation of insolvent banks are key. the first requirement has to be met through backstop facilities by the central bank while the second and the third issues have to be addressed through financial market regulation and supervision. ladies and gentlemen, i have certainly not been able to cover all aspects relevant in the context of the debt crisis or to do justice to the complexity of the issue at hand. but this is the very reason why we need this conference. i am confident that the broad diversity of speakers – ranging from representatives of academia and international institutions to policy advisors and decision - makers – will be able to provide a broad picture of the relevant issues, possible trade - offs and options for solutions. bis central bankers ’ speeches