. making exceptions for a large number of countries simultaneously undermines the disciplining effect of the fiscal rules. see feld et. al. ( 2013 ). bis central bankers ’ speeches so it remains to be seen how, and to what extent, the new stability and growth pact will actually reinforce fiscal discipline. perhaps enshrining debt brakes in national legislation, as envisaged by the fiscal compact, can provide a further impetus in that direction. 4. conclusion ladies and gentlemen, the crisis may be widely dubbed the “ sovereign debt crisis ”, but excessive public sector debt was not its only cause. a lack of competitiveness on the part of some member states, and excessive developments in the banking sector also played a decisive role in bringing about the crisis. but if i were to now discuss the macroeconomic imbalance procedure which was set up in response to the excessive economic misalignments, or the banking union, i would take all evening. that ’ s why i have confined my speech to just a few aspects of the regulatory framework, not least because these are precisely the areas in which switzerland can offer valuable insights into how existing weaknesses can be rectified. while it is true that not all the components of switzerland ’ s fiscal federalism can be transposed to the euro area, the concept at the heart of the swiss model – striking a balance between control and liability – can, and should, offer us some guidance for reforms in the euro area. restoring a regulatory framework that can stand the test of time is a challenging task. but i am certain that we will only bring about a more stable monetary union once this task has been overcome. or, as winston churchill once aptly put it, “ difficulties mastered are opportunities won ”. thank you for your attention. bis central bankers ’ speeches

##ing adjustment progress in the stressed countries. it is clear to me, however, that the decline in sovereign bond yield spreads has also been supported by central banks ’ actions. the ecb ’ s announcement of conditional but unlimited purchases of sovereign bonds has – unsurprisingly – calmed investors ’ fear of losing money. you may know that i was not in favour of this measure. while sovereign bond purchases are a widely used monetary policy tool, they are not without risks. they bring monetary policy very close to monetary financing of governments, which could undermine the central bank ’ s ability to maintain its mandate of price stability. monetary policy may face the danger of being dragged and driven by fiscal policy, and find it very difficult to free itself. the more so as governments become increasingly accustomed to bond purchases that keep the interest rates low. in this sense, sovereign bond purchases may act like a sweet poison for the governments. the rude awakening may come when the purchases are reduced or stopped altogether. bis central bankers ’ speeches one particular problem with sovereign bond purchases in a monetary union is that they redistribute risks among the taxpayers of different countries. any such decisions, however, should be taken by democratically elected governments and parliaments. the rallying markets are also being sustained by exceptionally easy monetary policy conditions the world over. nevertheless, there is a risk that market valuations may be running ahead of the adjustment processes. the current long - term yields on some european government bonds already appear to have factored in the required adjustment to a large extent. this, however, creates a setback potential. it is therefore all the more important that policymakers ensure that the necessary economic progress is actually achieved. their determination to implement reforms is pivotal. in any case, low interest rates do run the risk of creating incentives to postpone necessary reforms. thus, the current environment necessitates an even stronger political will. there is no question of there being a quick fix to eliminate the causes of the crisis. considering that the risk potential built up over many years, it is obvious that it will also take time to reduce it. 2. how to make emu more resilient the question is : how do we best go about making emu more resilient? as a starting point for the analysis of the crisis, it is helpful to recall the institutional set - up of the european monetary union. when emu was established, monetary policy was centralised while fiscal and economic policies remained in national