once said : that “ anyone who does not believe in miracles in european matters is not a realist ”. 2 due to resolute actions by euro area governments and european institutions, the year 2012 turned out quite differently than predicted. the darkest clouds over the euro area subsided. countries renewed their commitment to reforms. the euro area took strides forward in its common governance. the economist : “ the world in 2012 ”, 16 / 11 / 2011. walter hallstein : „ wer in europaischen dingen nicht an wunder glaubt, ist kein realist “. bis central bankers ’ speeches europe ’ s policy - makers, including the european central bank ( ecb ) within its mandate, left no doubts about their commitment to our common currency and to its stability. we can begin 2013 on a more confident note, precisely because significant progress was made during 2012. significant progress in 2012 first of all, governments did their part to ensure stability. during the last year, an important change took place “ on the ground ” in the economies of europe. the necessary rebalancing of the euro area economy gathered pace. a comprehensive adjustment in the deficit countries is now taking place. many countries are making solid progress in bringing their public finances under control. they are enacting structural reforms to increase competitiveness. this is especially true for the countries under an eu / imf programme, where adjustment has been extensive. reducing the imbalances is certainly a difficult and painful process. but it is essential to restore sustainable public finances and growth. the people in the countries concerned have broadly understood this and backed this course of action. the progress made deserves public recognition and respect. governments also came together in 2012 to strengthen the euro area and its ability to prevent and react to crises. the european stability mechanism became active and provides a solid safety net if needed. the new rules for governing the euro area economy were applied to strengthen oversight of budgets and to monitor emerging imbalances more effectively. member states agreed to put debt brakes in their national constitutions. most importantly, europe ’ s leaders recognised that monetary union needs to be complemented by a financial union, a fiscal union, a genuine economic union and eventually a deeper political union. discussions are underway with clear timelines in the months ahead. the most urgent project – financial union – is now taking tangible shape. the ecb is expected to become the single supervisor for the biggest part of the euro area ’ s banking sector. this is

willem f duisenberg : new economy, financial markets and monetary policy speech by dr willem f duisenberg, president of the european central bank, at the meeting of the zurcher volkswirtschaftliche gesellschaft, zurich, 19 may 2003. * * * introduction ladies and gentlemen, i am delighted to be here to address you this evening, and i should like to start by thanking the zurcher volkswirtschaftliche gesellschaft for inviting me to do so. being trained economists, you all know that in the course of the past century, monetary theory has faced significant challenges from various angles - the keynesian revolution, the neo - classical synthesis, the monetarist counter - revolution, the emergence of new classical economics with the introduction of the concept of rational expectations, and real business cycle theories. similar to the experience of monetary theory, monetary policy has had to cope with major challenges as well. we all know that the economic and financial environment in which monetary policy has to operate is continuously changing. during the past few years - as has been rather obvious - these changes have included the discussion about a “ new economy ” and, driven by the interrelated processes of financial liberalisation and financial globalisation, the growing importance of financial markets. you may wonder why someone should raise the topic of the “ new economy ” again, as it has been discussed so extensively by many, including myself, on many an occasion before. is this not a topic which has actually become rather “ old ” by now ; another chapter in the history books of economic science? i do understand these concerns. let me assure you now that i will not bore you with a recollection of past events. i intend my expose today to be forward - looking, as should the expose of any central banker. i want to discuss what lessons for the future we can draw from over - optimistic expectations related to so - called regime shifts, such as the supply - side shock of a perceived “ new economy ”, and the subsequent financial boom and bust cycle in asset prices. how should monetary policy - makers deal with the resulting financial imbalances and reconcile monetary stability with financial stability? in my presentation today, i shall first briefly discuss the challenges that have been presented by the new environment for monetary policy - makers, in particular by the “ new economy ” and the growing importance of capital markets. then, i shall look at what i call the excesses of this new environment, which for me are the speculative boom