over the medium term. combining financial assistance with strict conditions has brought the negative economic trends in the programme countries to a halt. the economic downturn in some of the most strongly affected countries may even have bottomed out in the near future. what is crucial now is to ensure that the programme countries do not stray from the path of essential fiscal, financial and structural adjustment. the second step undertaken was the strengthening of the framework for steering economic policy at the european level. it is aimed at preventing dangerous imbalances in both public budgets and current accounts more effectively in future. the governing council of the ecb has urged time and again that economic governance in the euro area be improved, calling for the stability and growth pact to be strengthened, for procedures to be put in place to counter macroeconomic imbalances and for the ceilings on public debt and deficits set out in the stability and growth pact to be transposed into national legislation in all member states. we welcome that the regulatory framework has been reformed accordingly. however, the regulatory framework alone cannot ensure that economic policies are sound. paper doesn ’ t blush, as clearly evidenced by the failure of the original stability and growth pact. the new governance framework can only be successful if it is implemented consistently, according to both the letter and the spirit of what has been agreed. its success thus depends on the action taken by the european commission and the council of ministers. all this is confirmed by taking a brief look at the current “ european semester ”, the new process for the coordination of economic policy in the european union. i fear that the unsound economic policies in some member states are once again not being opposed decisively enough. the rules of the new european governance framework can only be effective if they are strictly applied. in particular, deadlines for the correction of excessive budget deficits should, for instance, only be extended, by way of exception, in the event of exceedingly adverse circumstances. extensions should not become the rule. the third set of measures is to be found in the first steps undertaken towards a banking union. the measures are aimed, in particular, at disrupting negative feedback loops between banks and public sector debtors, and at halting the increasing fragmentation of european financial markets. all banks in the euro area, as well as the credit institutions in member states that have arranged for close cooperation with the ecb, will be subject to european supervision, the “ single supervisory mechanism ”. although the ecb will be responsible for the

by the european central bank ’ s governing council. as regards the first condition, the impairments to the monetary policy transmission mechanism have noticeably declined, not least thanks to the monetary policy measures carried out by the european central bank, in particular the development of omts. the euro area is confronting a slow but steady recovery. certain member states that in 2011 and 2012 were subject to market overreactions are now seeing signs of positive growth. irrespective of the fact that yields for government bonds have reacted in varying degrees to new economic developments, there has been a clear reduction in the yield spreads compared to the situation in 2012. it is not the aim of omts to harmonise interest rates regardless of the differences between member states ’ macroeconomic or budgetary situation. concerning the second condition, two euro area member states are currently undergoing esm macroeconomic adjustment programmes. however, none of these programmes allow primary market purchases through the esm to the government bonds market. in conclusion, i can state that omts are in principle available as monetary policy instruments. the conditions for their crisis and location - related activation are, however, not currently met. possible volumes and potential risks for the federal budget with regard to the possible volume of omts it remains the case that no ex ante quantitative limits are set on the size of omts in order to prevent market participants from adjusting to this situation and using these instruments for their own purposes to the detriment of the effectivity of the monetary policy instruments put in place. notwithstanding this, the possible volume of omts is in fact quantitatively limited to one to three - year government bonds, which are suitable for omts. government bonds with a maturity of on to three years form only a small part of the entire volume of government bonds. the court of justice of the european union has confirmed that it follows from this that the commitments that the european central bank enters into are, in fact, circumscribed and limited. in order to ensure that maturities are not significantly shortened, it is foreseen that the european central bank ’ s governing council will closely monitor the maturity structure and the termination of new issues of government bonds in the concerned member states. thus the volume of omts is limited in a variety of ways. in assessing the potential risks of omts it should be taken into account that, in principle, the use of monetary policy instruments to maintain price stability entails financial risks for the eurosystem. this applies not