##condition for restoring the confidence in banking ; • build capacity in the central bank itself for pursuing an independent monetary policy and efficient banking system supervision ; • establish a modern payment system. many of these issues were successfully solved. manu of them are still being successfully treated. the national currency was successfully introduced, inflation was surmounted, and in the past 12 years it has been on average on the level of only 2. 2 percent, annually. the function of prudential supervision has been established, which is continuously being improved and upgraded. payment operations are conducted smoothly. so is the function of the government's fiscal agent. the capacity for conducting the monetary policy is in constant progress. from april 1992 until december 1995, the national bank applied a monetary targeting strategy, with the money supply m1 being the intermediate target. at that time, mainly direct instruments were used : selective credits, minimum liquidity, compulsory cb bills, discount rate and reserve requirement. the choice made was imposed by the circumstances : lack of developed financial instruments and institutional financial structure ; absence of the interest rate transmission mechanism, and high interdependence between the aggregate demand and money supply. in october 1995, nbrm made a shift towards monetary strategy of targeting the nominal exchange rate against the german mark, and later against the euro, with the denar exchange rate stability being the intermediate monetary policy objective. such a strategy, applied in a small and open economy such as ours, has proved to be very successful for maintaining the price stability until present day. all reforms in the monetary policy instruments since the independence have been directed towards introducing indirect, market - oriented instruments for enabling efficient monetary policy conduct. therefore, in 1993 deposit and credit auctions were introduced, and at the end of 1994 cb bills auctions were introduced. the initial development and strengthening of the financial system of the republic of macedonia, especially of the government securities market, enabled us to include new instruments, following the example of the modern central banks. in april 2005, we promoted the overthe - counter market for government securities. in the same year, we launched the general repo agreement and we started with repo operations when concluding lombard credits. in march this year, together with the ministry of finance we introduced treasury bills for monetary policy purposes. the transition of the monetary strategy and of the monetary instruments would not have been successful without adequate banking reforms. therefore, rehabilitation and privatization of banks were undertaken, deposit insurance fund was established and new regulation on prude

not of a monetary nature. at the member state level, fiscal consolidation policies and structural reforms were needed and are being implemented to better accommodate domestic behaviour to the patterns of stability required within a monetary union. as for euro area governance, a deep process of reform has been undertaken. the stability and growth pact has been strengthened to preserve fiscal stability ; and a new procedure – the macroeconomic imbalance procedure – has been established to prevent the accumulation of other non - fiscal imbalances. also, the european stability mechanism and the banking union process have filled in two serious gaps. now, to conclude, i shall try and respond to the questions to this panel about germany ’ s role in the european debt crisis and whether germany is a reluctant hegemon. indeed, germany has played a key role in the response by the european monetary union to its financial and fiscal crisis and to the dangers this crisis has entailed for the union and the euro. in early 2012, many analysts and politicians considered it very possible that certain bis central bankers ’ speeches countries might exit the monetary union, thereby triggering an extremely serious crisis. many believed the european monetary union was running an almost terminal risk, at least in its formulation under the maastricht treaty. to germany, then. its economy and its government have been fundamental in facing and overcoming these risks. without a german political stance in defence of the monetary union and the euro, the single currency would surely not have survived. obviously, germany has not acted alone, but as the euro area ’ s leading economy, its role has been crucial. i do not believe germany may be said to have exercised this role reluctantly. in germany, as in other euro are countries, there were and are forces in disagreement with the monetary union, analysts and economic agents who considered the break - up of the euro as likely. but what counts is what the german government ’ s position was and its support, at key moments, to save the monetary union and the euro, its support to the programmes for stressed countries and the banking union process. rather, we can say that the new hegemon is the culture of monetary and fiscal stability that has gained in strength over the course of the crisis. the strengthening of the institutions and of the rules to ensure fiscal stability is essential for maintaining the stability of the monetary union and of the euro. this is because, as we all know, the source of the monetary union crisis lay basically in certain countries ’ fiscal performance, even more so than