to play. the primary goal of monetary policy is to safeguard price stability. to reach this objective, the independence of monetary policy has to be maintained in all its dimensions, at all times and everywhere. thus, to safeguard financial stability, a different set of tools is necessary, and these tools are usually referred to as macroprudential policy. bis central bankers ’ speeches 3. current issues in financial stability having established that, let us take a brief look at current risks for financial stability. not every country faces the same risks, of course. turkey most certainly faces different challenges than germany. nevertheless, there is an underlying trend at the global level that influences financial stability in most countries. this trend has four elements : very low inflation and very low interest rates in major economies as well as abundant liquidity and low volatility in many financial markets. together, these four ingredients make up a cocktail that may well result in a bad headache the morning after. one potential problem is the search for yield. investors may eventually increase the risk of their investments to make up for the shortfall in yields caused by low interest rates. and, indeed, it seems that investors have already begun their search for yield. in its latest annual report the bank for international settlements ( bis ) states that, “ some asset valuations showed signs of decoupling from fundamentals ”. one example can be found in corporate debt markets. here, valuations indeed look somewhat stretched. the bis estimates that gross issuance in the high - yield bond market increased to us $ 90 billion per quarter in 2013 – three times the pre - crisis quarterly average of us $ 30 billion. 1 the strong recovery in the property markets of some euro - area countries should also set us thinking. take the german housing market, for example. between 2009 and 2012, prices in large cities rose by almost 25 %. in 2013, they increased by another 8. 9 %, and bundesbank calculations point to overvaluations in urban areas. nevertheless, overall, prices in germany have not yet moved away from fundamentals. thus, at this point in time, we see some local exuberance but not a bubble. but it is not only bond markets and housing markets we have to keep our eye on. stock markets are an important issue as well. in 2013, there was only one way for most stock markets to go, and that was up. the eurostoxx 50 increased by 18 %, the ftse 100 by 14

it was deemed necessary to help other member states. this is quite understandable in the short term. however, in the long run it is dangerous if countries with a debt problem can expect to receive help no matter what. this can raise the spectre of a dangerous spiral of more and more assistance and less and less confidence in the will of the affected countries to amend their ways. routes to a stable monetary union and such a loss of confidence is just what we are facing right now. the public, and also the markets, have lost faith – in politics, but also in the architecture of monetary union. the question is : how do we go about restoring confidence? let me begin by stating clearly what won ’ t work. confidence cannot be sustainably restored by putting more and more money on the table – for instance, by constantly ramping up the rescue funds. this strategy ultimately has its limits – be they political or financial. and the proposal of circumventing financial limits by switching on the printing presses is dangerous. of course the resources of a central bank are, in theory, nearly limitless. using them to finance sovereign debt, however, does not solve problems but instead creates new ones. such an approach would endanger the key foundation of a stable currency : the independence of a central bank that is dedicated to price stability. this would throw overboard the very things that need saving. and, as i said earlier : money can ’ t buy you confidence. the only thing that can be bought is time. with the efsf and the forthcoming esm, instruments to do just that have been created. however, this bought time must also be used to eliminate the root causes of the crisis. from this we can derive three main things that, in my opinion, need to be achieved. firstly, government budgets need to be put back in order. this goes for all euro - area countries, but is particularly incumbent on those countries which have time and again put off the necessary adjustments. efforts are apparently being made at the political level to step up pressure from other member states and the european commission. secondly, the countries affected by the crisis need to conduct structural reforms in order to become more competitive and to promote economic growth. such reforms are, naturally, difficult and painful. the irish case shows, however, that they are possible, and the german case shows that they pay off in the long run. and, thirdly, we need a stable architecture for monetary union. instead of constantly