, again, the recent proposals of the potential german coalition partners are promising. the creation of a european monetary fund seems to go in the direction that we, the bundesbank, have been advising for quite some time. 3 / 5 bis central bankers'speeches formally, the eu has a set of fiscal rules that restrict public borrowing – the stability and growth pact. yet these were regularly violated before the financial crisis, without any meaningful consequences. in response, the eu reformed the stability and growth pact in 2005, but the outcome was to expand the discretionary scope even further. the european commission, despite its role as guardian of the stability and growth pact, has already exploited its scope on several occasions and interpreted the rules rather generously in doing so. indeed, some euro area countries have been breaching the rules for nine years now. what is needed to strengthen the fiscal rules is a simple and transparent design and implementation of the rules. 2 the transfer of responsibility for fiscal surveillance from the european commission to an independent institution would be a big step towards a less political approach. one promising measure would be to strengthen the role of the european stability mechanism, esm for short. thus far, the esm has been tasked with providing financial assistance to euro area countries experiencing or threatened by severe financing problems. however, if member states retain their fiscal autonomy, the sustainability of public finances will need further safeguards beyond rules alone. it is therefore essential that the binding force of the rules be additionally shored up by the disciplining effect of the market. in other words, interest rate levels and, therefore, financing costs have to be realigned more closely with the risks in government budgets. the only way to achieve that, however, is to restore the credibility of the no bail - out clause in the maastricht treaty. investors have to perceive a more credible threat of losing money if they buy bonds from governments that have unsound public finances. one proposal put forward by the bundesbank envisages changing the contractual terms for sovereign bonds in the euro area by introducing an automatic maturity extension for them as soon as the issuing government applies for an esm programme. up to now, a large part of the assistance loans have ended up being used to pay off the original creditors. this means that the original creditors, such as banks, are then let off the hook – at the taxpayers ’ expense. in contrast, extending maturities would leave the original creditors on the hook, and they could

need to rest with the fsa. but norges bank can make strong recommendations on how these instruments shall be used for macroprudential purposes. we shall seek very close cooperation with the financial supervisory authority to implement our macro prudential agenda. the nordic region is currently close to being a separate banking market, where non - nordic banks have small market shares. but branches with parents in other nordic countries have substantial market shares in all national markets. there is scope for fruitful cooperation between the nordic supervisory authorities. the countercyclical buffer proposal from the basel committee includes a prescription to that effect. it stipulates that the time - varying capital buffer targets shall be applicable to all banks operating in a jurisdiction, including branches of foreign banks. the home supervisor shall impose the buffer decision of the host supervisor. this is a step in the right direction, but differences in risk modeling will remain. there is hardly any good reason for different risk weightings on similar loans given by a domestic bank and a branch of a foreign bank. with these thoughts on central banks and macroprudential policies, i would remind you that we organize this conference hoping that we shall be able to take something useful away for our further work on financial stability. i would like to thank the program committee for putting together what looks like an engaging program. i wish all of you good luck and hope you shall have fruitful discussions in the next two days.