is already fading from collective memory. given the deceptive tranquillity in the financial markets, we are at risk of forgetting what the crisis has taught us about public finances. but that would have dire consequences. as i emphasised in my opening remarks yesterday, the markets do anticipate that reforms will be finalised and that public budgets will be consolidated. thus, any doubts over the sustainability of public finances can send huge shockwaves across the euro area. in addition, mountains of private and public debt block the way towards sustainable economic growth. and on a side note : at this stage of integration in the euro area, euro - bonds would not be the right path to choose as they would weaken the incentives for prudent fiscal policy. nevertheless, to me, the recent debate about the stability and growth pact shows something else. it seems that there is an expectation that, in the end, monetary policy will provide the bis central bankers ’ speeches ultimate backstop. this expectation, however, is dangerous and cannot be the guideline for policy action – or rather inaction. monetary policy certainly helped prevent the crisis from escalating. still, there is one thing we should be clear about : monetary policy cannot solve the underlying causes of the crisis. it can only buy time. and it is up to national governments to use that time to dig out the root causes of the crisis. failing to do so will push us back into dangerous territory. we must not let that happen. 4. conclusion ladies and gentlemen i have presented what i consider to be good news. the german economy is gaining in strength and the euro area has embarked on the path to recovery. nevertheless, we should keep in mind, what the irish horse racing jockey tony mccoy said : “ there is no place for arrogance or complacency in racing because you are up there one minute and on your backside the next ”. keeping up economically is certainly a race and we should avoid the risk of landing on our backside. thus, my warning : beware complacency. as a final point, let me emphasise that i have very much enjoyed attending this seminar. it has certainly helped strengthen the ties between the central bank of the republic of turkey and the deutsche bundesbank. personally, i am looking forward to more visits next year when turkey assumes the g20 presidency. thank you very much. bis central bankers ’ speeches

andreas dombret : germany and the euro area – beware complacency speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at a joint seminar of the central bank of the republic of turkey and the deutsche bundesbank, istanbul, 5 july 2014. * 1. * * introduction ladies and gentlemen as i pointed out in my opening remarks yesterday, i am happy to be here in istanbul to attend this joint seminar of the central bank of the republic of turkey and the deutsche bundesbank. over the past two days we have shared ideas about macroprudential policy, and we have improved these ideas through discussion. at this point, i wish to change the perspective and take a closer look at the real economy and the macroeconomic situation in germany. and as germany is part of a monetary union, my presentation would be incomplete without discussing the situation of the euro area as well. 2. germany : no time for complacency looking to the past, the german economy has shown a remarkable development. as late as 2004, the economist magazine dubbed germany “ the sick man of europe ”. plagued by high unemployment and a lack of competitiveness, germany undertook structural reforms that were as painful as they were successful. germany left the sick - bed and took bold steps towards recovery – only to be hit full - force by the fall - out of the financial crisis. in 2009, amidst a global recession, german gdp dropped by 5. 1 %. for germany this was by far the biggest downturn in post - war history. however, the economy recovered quickly and in 2011, german gdp had returned to its pre - crisis level – sooner than in any other country in the euro area. what is the story behind this v - shaped recovery, the big drop and the quick rebound? from a general point of view, it was the structural reforms i mentioned before that prepared the ground for the strong recovery following the crisis. nevertheless, the distinctive pattern of a severe drop and a rapid recovery highlights a specific feature of the german economy : its pronounced export orientation. when the global economy faltered in 2009, germany was hit far worse than other countries. but when the global economy began to recover in 2010, germany followed suit. exports were the major driving force behind the upturn in the german economy. this strong influence of international trade worried some observers. many felt that germany ’ s reliance on exports was risky, as it exposed germany to the ups