, one can say that monetary analysis, and also the signals given by “ headline ” growth rates of key monetary aggregates, have proved more reliable guides for monetary policy decisions than many external observers anticipated when the strategy was announced two years ago. of course, one can never exclude that monetary aggregates may be significantly distorted in the future. we may face shocks to money demand or special factors. therefore, the governing council has always made clear that it does not react in a mechanistic way to monetary aggregates - rather a careful reading and thorough analysis of ( headline ) monetary developments will always be needed. as regards the second question, the governing council recognised that although the monetary data contain information vital to informed monetary policy making, on their own they will not constitute a complete summary of all the information about the economy required to set an appropriate monetary policy which maintains price stability. therefore, in parallel with the analysis of monetary growth in relation to the reference value, a broadly based assessment of the risks to price stability in the euro area - the so - called “ second pillar ” - plays a major role in the ecb ’ s strategy. analyses in which monetary and credit aggregates do not play a major role are consolidated in the second pillar. these analyses include the assessment of a wide range of non - monetary economic variables, such as labour market indicators, including wages and unit labour costs ; fiscal policy indicators ; and, financial market indicators, such as the yield curve and stock prices. the two pillar structure of the ecb ’ s strategy is often misunderstood by external observers as implying multiple targets for monetary policy, such as, on the one hand, an intermediate monetary target and, on the other hand, an inflation target. however, as i have already discussed, the maintenance of price stability in the euro area over the medium term is the primary objective of the strategy. both pillars of the strategy should be understood as instruments which help us to achieve this ultimate overriding objective. taken together, the two pillars of the strategy form a framework which organises the presentation and analysis of the “ full information set ” which is relevant for monetary policy making in order to assess risks to price stability and allows for cross - checking of information from different sources and approaches. precisely because of the lack of consensus about the structure of the economy and in particular the role of money in the transmission mechanism, economists are currently forced to work with a number of approximating models and frameworks, which each capture some important aspects of reality,

peoples and nations in europe. bis central bankers ’ speeches institutions that foster cooperation for mutual benefit. institutions that manage our interdependence by preparing collective decisions. as jean monnet put it, “ nothing is possible without men and women, but nothing is lasting without institutions. ” we are privileged in europe to have institutions that contribute to binding together our continent, that embody the values of the european project and carry it further. the european commission, led by mr. barroso, is at the heart of this process. the european council, led by mr. van rompuy, gives it direction and momentum from the highest level. in the domain of economic and monetary union, the eurogroup, led by mr. juncker, drives forward its agenda and confronts its challenges. in keeping with the vision of the karlspreis, i will focus my remarks today on how developing further our common institutions is the key to the next stage of european economic and financial integration. my main message is that the achievements of economic and monetary union ( emu ) to date have been made possible by the ecb and the eurosystem, the strong institutions of monetary union – the m in emu. in the same vein, confronting the challenges of the future requires strengthening the institutions of economic union – the e in emu. economic and monetary union emu is the area where europe has progressed furthest. it is a union where sovereign nations share a single market, a single economy and a single currency. where they bind their actions through common laws and institutions. where they remain unified and diverse at the same time. this unique arrangement fulfils the visions of centuries of great european thinkers. … of erasmus in the 16th century, who spelled out the moral limitations of a strict concept of nationhood … of william penn in the 17th century, who recognised that european nations could mutually benefit by creating common institutions … of immanuel kant in the 18th century, who understood that the authority of such institutions had to rest on common laws … of victor hugo in the 19th century, who realised that democratic participation was necessary to provide these laws with legitimacy … and of robert schuman in the 20th century, who saw that the foundation of all of the above would be economic integration. it is important to keep in mind this historical perspective, seeing beyond the current challenges in the euro area. emu is itself an unprecedented achievement in the history of sovereign nations – a goal to which generations of europeans have as