proper functioning. maintaining liquidity in the money market serves two purposes. • it avoids disturbances in the transmission of monetary policy by ensuring that shorter - term interbank money market rates remain aligned with the level of the ecb ’ s key policy rate so that they properly reflect the ecb ’ s monetary policy stance determined by the governing council with a view to maintaining medium - term price stability in the euro area. • it avoids liquidity bottlenecks that could impair the working and, potentially, even the stability of the financial system. however, while the ecb can make an important contribution to the smooth functioning of the money market by means of its liquidity - providing measures, it cannot solve the underlying problems. market participants and supervisory authorities must ultimately take measures to address the roots of the current mistrust. the best contribution the ecb can make to foster confidence in the current situation is to continue to firmly anchor medium to long - term inflation expectations in the euro area by keeping its policy uncompromisingly geared to pursuing price stability. adopting a more activist policy stance in the current situation, as some outside observers recommend, would only exacerbate uncertainty without helping to resolve the causes of the turbulences, which are outside the realm of monetary policy. market participants have to bear the consequences of their excessive risk taking. a more activist monetary policy stance would increase moral hazard risks and lay the basis for future excesses. both, in normal and in turbulent times we are well - advised to apply wellestablished guiding principles and practices in central banking. 4. the role of monetary policy in the economic governance framework of emu indeed, since the start of emu, the lack of a more activist policy conduct is a reproach that the ecb has faced on and off from some critical observers. they believe that an activist monetary policy could effectively promote growth and employment. this raises a question of fundamental importance which requires clarification : can we expect more from monetary policy than the maintenance of price stability? the answer to this question is very clear and uncontroversial among leading academics and policy - makers : price stability is the only and the best contribution monetary policy can make to the prosperity of the euro area economies. as i have already explained, beyond safeguarding price stability, there is nothing monetary policy can do to promote growth and employment. monetary policy measures will, in the long run, only influence the level of prices, whilst leaving the levels of growth and employment unchanged –

this is where the snb comes in. according to the national bank act, it is responsible for ensuring price stability, while taking due account of economic developments. by fulfilling this mandate, the snb makes a major contribution to a stable macroeconomic environment, and hence indirectly to the competitiveness of the swiss economy ( cf. chart 5 ). 2 from a historical perspective, the snb has successfully fulfilled its monetary policy mandate. long - term average inflation is lower and less volatile in switzerland than in most other countries ( cf. chart 6 ). as a result, the swiss franc has lost less purchasing power over time compared to other currencies. the generally stable economic and political environment in switzerland is one of the reasons why the swiss franc is popular with investors and has a tendency to strengthen. thus, a financial and monetary policy that successfully contributes to macroeconomic stability is both a basis for competitiveness on the part of swiss companies and a driver of swiss franc strength ( cf. chart 7 ). this is especially the case in times of heightened uncertainty. competitiveness and the strong swiss franc but aren ’ t these two consequences of a stability - oriented economic policy at odds with each other? or, to put it another way : does a strong franc really lead to a reduction in competitiveness? it is essential to differentiate between the short and long - term impact of a strong currency on competitiveness, and it is these differences which i will now examine in the second part of my remarks. in the short term, the answer is obvious : an appreciation makes swiss companies less competitive on prices than their foreign rivals ( cf. chart 8 ). it becomes harder for them to sell their products and services at a price that covers the costs involved. the increased pressure on margins forces many companies to make adjustments. without a doubt, these adjustments are painful and require a high degree of innovative thinking, a willingness to take risks and flexibility, from both employers and employees. if need be, companies may have to withdraw the global innovation index is published by cornell university, insead and the world intellectual property organization ( wipo ), and covers 143 countries. the innovation union scoreboard is a european commission tool for evaluating the innovation performance of eu member states and other european countries such as switzerland. as part of its mandate, the snb must also contribute to the stability of the financial system. a well - functioning system of bank lending is also an important pillar of macroeconomic stability. however