is as operationalised as inflation targeting. after all, back in 1978, the u. s. economic historian charles kindleberger, in his now classic book “ manias, panics, and crashes : a history of financial crises ”, pointed out that financial upheavals had virtually always been preceded by credit booms, property price and asset price booms and increased leverage in the financial system. all these are, in a sense, monetary phenomena. so why couldn ’ t we go further here as well? the second constraint is that smaller economies, both emerging and developed ones, are quite often in the position not only of monetary - policy takers, but also of regulatory - takers. so, they have to face the consequences of regulatory debates and decisions made by “ big guys ” somewhere else – debates and decisions they can influence only to some extent, if at all. and the emphasis in the world debate is now being put more on regulation on the micro level and less on these big questions i am discussing, despite the hard work of michael woodford and others here. i understand that micro - regulation is easier to create and to explain to the public, and sometimes also easier to implement. but it can also have faster adverse impacts. an example from europe – the harmonisation of deposit guarantee schemes ( dgs ) within the bis central bankers ’ speeches eu. it is generally a brilliant idea to have single dgs rules in the single market, but in the czech republic it has led to the abolition of the previous well - established practice of copayment when a depositor received an insured deposit from a failed financial institution. our practice was 10 % co - payment, so that depositors never got back 100 % of their insured deposits. the harmonised dgs rules established a different unified practice – deposits are insured up to 100 % of the equivalent of 100, 000 euros. this, of course, means a bigger incentive for moral hazard behaviour on the part of depositors. in the czech republic, depositors very soon started searching for higher interest rates, or higher yields, in smaller “ saving unions ” with inherently riskier business models, as these institutions are also covered by the dgs and suddenly became to a given limit riskless for savers due to the disappearance of co - payment. some of these institutions had to leave the market recently, eating up large sums from the pre - paid funds of the domestic dgs. i ’ m fairly sure

realistic. bis central bankers ’ speeches public finances, too, show a positive picture at present. in 2014, germany ’ s general government budget again recorded a slight surplus. while government expenditure was fuelled by a sharp rise in pension and healthcare costs, government interest payments again contracted significantly, chiefly thanks to the very favourable funding conditions. the fiscal balance could deteriorate somewhat in the current year. amongst other things, this is likely a result of faster expenditure growth due, not least, to the rise in social payments resulting from the pension benefits package adopted in mid - 2014. however, a slight general government surplus will again be recorded this year. regardless of the good situation overall and the favourable economic outlook, continued risks to economic developments in germany must not be neglected. this includes geopolitical tensions, amongst other things. what is more, the economic recovery that has got underway in the euro area remains fragile. the bottom line is that there is no room in germany for complacency on economic policy matters. in particular, the unfavourable demographic outlook will weigh heavily on the german economy in the medium term. by 2060, the population will have shrunk by up to 20 % and the labour force by around 30 %. to make matters worse, policy measures such as early retirement on a full pension at 63 are already constraining the labour supply, thereby eroding growth opportunities. 6. european banking union ladies and gentlemen, the single supervisory mechanism ( or ssm ), based at the ecb, has been up and running since 4 november 2014. in parallel to the introduction of the ssm, policymakers pressed ahead with efforts to create a regime for the orderly recovery and resolution of banks in 2014 without jeopardising financial stability or using taxpayers ’ money, if at all possible. this project is the second pillar of the european banking union. in this context, the eu regulation establishing a single resolution mechanism ( srm ) created the two elements of this pillar : on the one hand, a european resolution board and on the other, a single bank - financed resolution fund. the srm, which will enter into force in 2016, will apply the liability principle for banks as well. freedom to take entrepreneurial decisions and responsibility for the consequences are to be inextricably linked here, too – and this means, if the worst comes to the worst, resolving and therefore closing a bank. assuming they are involved at all, taxpayers will be the last