single currency and, second, that we must prepare in the best possible fashion for a successful enlargement of the euro area. question : in addition to price stability, the stability of the financial markets has become the focus of attention in the context of the current crisis. would it be sensible for the ecb to have an explicit mandate to safeguard the stability of the financial markets? answer : our primary mandate, to ensure price stability, is a very important prerequisite for financial stability. furthermore, our two - pillar strategy allows us to identify long - term risks to price stability and to financial stability at an early stage through our monetary analysis. in addition to our economic analysis, our monetary analysis examines not only the evolution of monetary aggregates, but also, in close detail, the dynamics of their components and of their counterparts, including the evolution of credit outstanding to categories of borrowers. this also brings potential risks to the stability of the euro area financial system to our attention. question : but is that enough? answer : all central banks make a contribution to financial stability in their respective economic areas. and i would say that in our case macro - prudential matters are certainly part of our responsibility. question : is the same also true of banking supervision? answer : the position of the ecb ’ s governing council has always been that a very close link between central banks and banking supervisory authorities is indispensable. one of the lessons of the first ten years of the euro, and of the recent financial market turbulence, is that if we can make an even greater contribution to the smooth functioning of banking supervision in general and in the euro area in particular – with regard to banking institutions with crossborder activities – this could be a sensible option. it has to be studied very carefully, and we will see afterwards what the position of the governing council will be. question : the spreads on government bonds have widened considerably in the euro area. unsound fiscal policies are thus punished, but some countries face potential refinancing problems on the capital market. is this a curse or a blessing? answer : the capital market is sending signals that need to be looked at attentively. following a phase in which the pricing of risks was, in general, too low, the markets may now be showing a tendency to overvalue risks. in any event, developments need to be watched closely. question : but who will stand by the side of the countries with worse ratings if the capital market

over the last year. moreover, low longer - term interest rates increase the market value of financial assets held by banks. this, in turn, results in capital gains that further support bank profitability. this aggregate picture masks some heterogeneity within the banking sector. in particular, depending on their business models, individual banks might be affected in different ways by the low interest rate environment. a second issue is the potential risk of credit or asset bubbles. currently, we do not see compelling evidence at the euro area level of stretched asset valuations. both corporate bond spreads and equity prices appear to be broadly in line with fundamentals. similarly, real estate price growth remains moderate in the area as a whole, although significant cross - country heterogeneity is observable. this assessment is corroborated by the fact that credit growth is still modest, which suggests that asset price developments are not accompanied by increasing leverage. nevertheless, the longer the accommodative measures need to be kept in place, the greater the risks of unwarranted side effects on the financial system become. for instance, asset prices may increase to levels that are not in line with fundamentals because investors might be tempted to take on more risk during times of low yields. such developments are best addressed by enacting appropriate macro and micro prudential policies. while our single monetary policy is geared towards delivering price stability for the euro area as a whole, macroprudential policy measures can be designed to address financial stability risks that may be building up in specific market segments, jurisdictions or individual countries. addressing potential risks at their origin also reduces the probability of contagion throughout the euro area. microprudential policies also help to reduce vulnerabilities in banks. i therefore welcome the european commission ’ s risk reduction proposals presented last november, which further develop the eu ’ s legal framework for credit institutions and should increase the resilience of banks. conclusion let me conclude. as i argued last week in ljubljana, and as the crisis has shown, the benefits of the single currency can only be fully reaped if we have policies and institutions at national and european level that ensure it works for everyone. in the run - up to the launch of the euro, there was a strong commitment to advancing along the path of institutional and economic convergence. the crisis showed that this commitment cannot be relaxed. in fact, it remains fully relevant today as we seek to strengthen emu and the