is equally pressing. member states have made it clear that they want to retain their autonomy in fiscal policy. but in that case we need stricter rules to counter the deficit bias that i mentioned before. some progress has been made on this issue. now, it is decisive that the rules are applied rigorously. in addition, placing monetary union on a sounder footing is closely linked to regulatory reforms in the financial system. but i will leave these important issues for the discussion, rather than going into them right now. admittedly, the crisis has opened our eyes to structural flaws at many levels. but this sobering experience has also provided the impetus to correct these shortcomings. the time has come to move from containing the crisis to resolving it. if we have the will to make the right choices, we will be able to rebalance europe and lay the foundation for a stronger, more stable monetary union. as winston churchill said : “ difficulties mastered are opportunities won ”. ladies and gentlemen, i have presented my ideas to you and i now look forward to discussing them with you. thank you for your attention. bis central bankers ’ speeches

stood at 17 %. after banca d ’ italia was granted greater independence, inflation rates began to fall significantly. or think of the uk : after the new monetary framework was established in 1993 and the bank of england was granted greater independence, inflation rates also came down. however, during a crisis the boundary between monetary and fiscal policy can become blurred. to contain the crisis, central banks have to act more flexibly and accept more risks on their balance sheets. i think this is unavoidable, and the eurosystem has already undertaken tremendous efforts in this direction. but although there are times when things are not black and white, i do not think clear distinctions are completely irrelevant. this is particularly pertinent in a monetary union where member states retain their autonomy in fiscal and economic policy. in such a setting, governments have an incentive to accumulate debt ; this is known as a deficit bias. to counter that incentive, the eu treaty explicitly prohibits monetising public debt. if central banks went down this route, they would be redistributing fiscal risks and costs among the taxpayers of the euro area. however, this is the prerogative of national parliaments. if central banks ’ balance sheets are used to bring about redistribution and if the implied costs become apparent, this could have a highly corrosive effect on the credibility of central banks and on their independence. credibility and independence are, however, indispensable to maintain price stability and to ensure the acceptance of monetary union as a whole. this would be too high a price to pay, and again we would merely be buying time. 4. conclusion this brings me back to the beginning of my speech : we must not just contain the crisis, we must resolve it. to achieve this goal, we must address two central issues : the problem of excessive public debt and the problem of macroeconomic imbalances. bis central bankers ’ speeches countries with current account deficits and excessive public debt must act. they must implement structural reforms and they must consolidate their budgets to get back onto a stable growth path. of course, adjustment is a huge challenge for the people in these countries but the status quo is clearly unsustainable, and doing nothing will lead to even sharper corrections. by contrast, taking up the challenge will open the doors to a more stable and more prosperous future. in my speech, i have focused on the member states. this is not to deny that an overhaul of the institutional framework of monetary union