stable price level, a high level of employment and the equilibrium of the balance of payments, while enabling a continuous and stable path of economic growth. it was this assignment of goals which led to stronger government activity and an increase in public debt. it took only a few years until the key problem with the attempt to fine - tune aggregate demand became obvious. it became apparent that fiscal policy programmes tend to lead to a rise in the ratio of public spending to gdp over time. while at the beginning of the 1960s the public sector share in gdp had amounted to roughly 33 %, it reached 42 % in 1973. this rise was mainly financed by additional borrowing. the overheated economy reached record levels of inflation, which peaked after the impact of the first oil price shock to almost 7 % in 1973. crucial for this development was the exchange rate commitment of the bundesbank under the bretton woods system and its resulting inability to regain control over monetary and credit expansion. after the bretton woods system the bundesbank regained control over domestic monetary expansion. its monetary policy framework was reviewed and adjusted. eventually this led to a clear assignment of policy goals and instruments. from a pure monetary perspective the result was encouraging. the bundesbank got inflation under control. initially, however, fiscal policy took expansionary measures in the aftermath of the oil price shock. at that time it was not generally acknowledged that a high value of public debt could create fears of future tax increases. and such fears could reduce current private spending, thus rendering public deficit spending ineffective. a shift towards a more sustainable supply - side - oriented path of public finances became necessary. this was realized in the early 1980s. the paradigm change in fiscal policy was quite successful : until the end of the 1980s public spending was cut back to a level of 46 % of gdp, a major tax reform was implemented and the public sector deficit was nearly cut back to balance. before being able to reap the full benefits from these efforts, our economy was confronted with the challenge of the german reunification. mostly due to the huge amounts transferred to the new lander, the public debt ratio rose by 15 percentage points between 1989 and 1995. the tax burden ( including social security contributions ) increased considerably. in spite of the budget problems and the expansionary monetary shock resulting from the conversion of east german financial assets and liabilities into d - mark, monetary policy successfully defended the purchasing power of the currency. in summarizing, i would like to stress that german monetary policy

andreas dombret : " the new normal " in banking - perspectives for regulators speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the bundesbank reception as part of eurofinance week 2016, frankfurt am main, 15 november 2016. * * * 1. " the new normal ” in banking – orientation through regulation? ms daniele nouy vice - president sabine lautenschlager ladies and gentlemen the “ new normal ” is the big topic of this year ’ s euro finance week here in frankfurt. to me, the term “ new normal ” carries negative undertones. it reminds us that many aspects of banking business – from the relationship between a bank and its customers, via political risks, to sources of income – have changed, all at the same time – and for good. this can certainly engender frustration and fear. still, i don ’ t believe that change and uncertainty, in themselves, are necessarily a cause for complaint. after all, they are the foundations of economic activity in general, and of banking business in particular. but, as so often in life, it is a matter of degree. what many people undoubtedly want from banking business ’ s new normal is an adequate amount of orientation. banks and savings institutions want orientation for regulation, as well. all eyes are now on basel iii. two essential questions arise today : what is the current status of the reforms? and what can we regulators do to provide banks with suitable orientation for the “ guide rails ” of banking business? allow me to make a preliminary remark. in my opinion, there is no such glaring conflict between banks and regulators about the need for a planning horizon. the basel committee central bank governors have specified the timeframe in good time and stipulated that capital requirements should not increase significantly overall. such a voluntary commitment surely did not and does not make the committee ’ s job any easier. but it gives the institutions some orientation and helps them to establish a planning horizon. financial institutions receive clear guidelines through a globally harmonised regulatory framework which sets incentives for careful bank management while being, at the same time, as simple as possible. for me, that is the essential principle of the forthcoming basel reforms. where do we stand today? the basel committee ’ s all - important meeting in santiago is just over two weeks away, and i think we ’ ve already made good progress ; but that certainly doesn ’ t mean we ’ ve reached our destination. we still