key prerequisite for a prosperous euro area. i would therefore like to take a closer look at the architecture of the euro area and outline how we might improve its stability. if we were to try to compare the architecture of the euro area to that of a real building, i don ’ t think the la redoute here in bad godesberg would immediately spring to anyone ’ s mind. this beautiful building is simply too symmetrical. instead, you would probably think of structures such as the guggenheim museum in bilbao or the gehry buildings in dusseldorf ’ s media harbour, because one of main features of the euro area is its asymmetry. it brings together 19 largely autonomous fiscal policies under a single monetary policy. nobody would say that asymmetrical buildings such as those i have just mentioned cannot be structurally stable, but they are bound to require complicated calculations. to a certain degree, the founding fathers of the monetary union also performed structural calculations and were aware that their asymmetrical design contained flaws. the risk of accumulating excessive debt is greater in a monetary union than in countries with their own currencies. one reason is because the member states of a monetary union are not borrowing in their own currency. another is that there are greater incentives to borrow in a monetary union because any consequences of relying too heavily on capital market funding can be passed on to the other member states – at least in part. i usually like to compare this to the overfishing of our oceans. however, here in bonn, the un ’ s “ climate capital ”, i would prefer to compare it to greenhouse gas emissions. the damage caused by co2 emissions is global, whereas the benefits from, say, the burning of fossil fuels, are local. this simple logic explains why preventing climate change is so difficult in practice. the dilemma can only be solved through international cooperation. the kyoto protocol was intended to protect the atmosphere and reduce greenhouse gas emissions, and it remains to be seen whether this will finally be achieved thanks to the agreement recently signed in paris. to protect the single currency and prevent excessive debt, the member states of the euro area have also agreed on a “ kyoto protocol ” of their own – the maastricht treaty, which includes the stability and growth pact. under the terms of the treaty, the member states pledged to maintain sound public finances and prohibit central banks from printing money to fund cashstrapped governments – also known as the ban on monetary financing of governments. they

countries, the efforts to mop up the post - crisis carnage have centred around the question of debt. high levels of household and corporate debt in some euro - area countries are continuing to stifle overall economic activity, particularly investment. but private indebtedness is not the only topic on the agenda – public debt also needs to be addressed. a string of euroarea countries have made huge progress in scaling back their fiscal deficits since the onset of the sovereign debt crisis – indeed, greece, ireland and others deserve plaudits for paring back their annual deficits by ten percentage points or more. but more often than not, countries are still crashing through the 3 % deficit ceiling. and if we factor cyclical gains and temporary measures out of the deficit numbers, then the structural deficits, as they are known, have been static at best or even going back up. essentially, the opportunity opened up by the low interest rates to bring down structural deficits particularly quickly was squandered. in the key area of labour market reforms, countries like italy, spain and france have made tangible progress in the right direction since the crisis struck. but employment could be boosted further still if france and spain, say, act even more decisively to address the divide splitting their labour markets into temporary and permanent employment contracts. the goods markets are another area where key decisions unleashing the forces of growth can be made. for instance, some european countries have rules which inhibit the growth of small enterprises. but when highly innovative small businesses are prevented from scaling new heights, this stunts economic growth. another case in point is the red tape involved in setting up a business, which is a major hurdle across much of europe and, i might add, especially so in germany. the world bank ’ s doing business report ranks our country 107th for red tape, alongside antigua and barbuda and behind nepal and ghana. so we ’ re not “ best practitioners ” in this respect, not by any stretch of the imagination. and there are other areas where germany would be unwise to rest on its laurels. potential growth is just a meagre 1. 3 %, and globalisation and the “ energy u - turn ” are exposing the economy to mounting competitive and cost pressures. more importantly, german society is feeling the effects of radical demographic change, which will take its toll on the country ’ s growth prospects. over time, the working - age population will diminish and the number