of our region. all of this means that our currency union needs further reform – both at member state and euro area level. i believe there is wide agreement on this. where we still lack agreement, however, is on how these reforms should look in practice. i have described elsewhere the requirements of reform from the perspective of the single monetary policy. 1 as the central bank of the euro area, we have a stake in the success of the current discussion. without further reforms, and depending on the nature of the next crisis, we may well be forced to test the limits of our mandate – a concern that has been voiced by germany in particular. i offered three “ lines of defence ” that any well - functioning monetary union depends on : flexible markets, adequate national fiscal buffers and a common fiscal instrument to cope with large shocks. the logic is simple and compelling. flexible markets for goods, services, labour and capital reduce the need for costly macroeconomic stabilisation and curb contentious debates about 1 / 3 bis central bankers'speeches crisis management. they reduce both the likelihood and impact of shocks and allow economies to bounce back more quickly. and they save much of the precious political capital governments had to spend on acrimonious crisis discussions. but flexible markets come at a price. in a downturn, they often impose economic hardship on workers through job losses or wage cuts. governments can mitigate these effects. unlike the united states, however, the european union is not a federation. this means that – as a rule – stabilisation needs first to take place at member state level. building and maintaining adequate room for action at national level is therefore essential. this is what our fiscal rules are about. and contrary to common perceptions, this is not only about bringing general government deficits under the 3 % line, but it is also about bringing them closer to balance or to surplus in the medium term so that fiscal space can be used in the event of a recession. but even ex ante solvent governments can come under pressure in the face of very large shocks. absent national stabilisers, such as an autonomous monetary policy and exchange rate, such shocks have already tested the cohesion of the currency union as a whole. this is why a common monetary policy needs a complement in the form of a common fiscal instrument that can support – under proper democratic control – aggregate demand if need be. many of the economic and monetary union ( emu ) reform proposals that are currently being discussed would help bolster

in the payments space could grow too large. but these are not fears which i share. and i would even go so far as to say that, with the proportion of cash transactions declining, you can – if anything – view it as a step towards maintaining the size of that footprint as it stands today. 5 centralised or decentralised settlement? the introduction of central bank digital currency poses a major challenge from a technical and economic perspective. the system needs to be capable of processing an extremely high number of payments per day in a secure and swift manner. and this is precisely where centralised settlement infrastructures could have an advantage over decentralised settlement. the scalability trilemma is a term used in specialist circles to refer to the idea that only two out of three attributes – scalability, decentralisation and security – can be ensured to a satisfactory degree at the same time. well, nobody has any interest in a system which is insecure. so, if the scalability trilemma holds true, a decentralised settlement system would leave only the option of the combination with security. but this would then be at the expense of scalability. [ 4 ] if a payment system is unable to process enough transactions, it could lead to fragmentation in the payments market. the dawn of the railway age in germany also saw a similar problem. each small state had issued its own money, meaning many different currencies existed alongside one another in germany. while the newly constructed railways allowed people to travel quickly to a neighbouring small state, if they wanted to buy anything, they had to change their money every time they crossed the border. added to this, there were so many different exchange rates that it was a real hassle to keep track of them all. and this was how things stayed until currency was centralised. in 1871, a decision of the german parliament introduced the mark as the common currency throughout the entire territory of the kaiserreich, rendering the need to change money at borders within germany obsolete. a milestone in the history of money in germany. 1. deutsche bundesbank ( 2022 ). payment behaviour in germany in 2021. 2. deutsche bundesbank ( 2022 ). payment behaviour in germany in 2021. 3. 5 / 6 bis - central bankers'speeches 3. deutsche bundesbank ( 2021 ). payment behaviour in germany in 2020 – making payments in the year of the coronavirus pandemic. 4. auer, r., c