in its own right? the eu has always been a system “ sui generis ” – a set - up unlike any other, which means, it has always been subject to change. the underlying question is this : which competencies need to be at the eu level, which should be kept at the intergovernmental level and which at the national level? in my opinion, before we plan any concrete reforms, we first need a clear economic and political analysis of past crises : to better understand what led to the crises, and to identify, from today ’ s perspective, which policy measures worked, and which ones didn ’ t. building on these insights, we can design tailor - made reforms. from my point of view, there are three key questions we have to discuss and resolve : first, there is the conditionality of cross - european support as an underlying principle. we have the stability and growth pact which sets out the fiscal surveillance rules and limits for government deficits and debt. in the bundesbank ’ s opinion, monitoring activities under the stability and growth pact should be independent of political institutions, if the assessment is to be a neutral one. for example, the european stability mechanism could give such an assessment. currently, there are debates about reforming the esm into a “ european monetary fund ”, which might also provide assistance in times of asymmetric economic shocks. in the bundesbank ’ s view, it is important to grant financial assistance only subject to proper conditionality. if support is granted with no strings attached, as it were, fiscal stability and responsible budgetary policies will be undermined. second, we need to sever the sovereign - bank nexus. in the recent crises, struggling sovereigns brought banks to their knees, because european banks hold quite substantial stocks of domestic sovereign bonds on their balance sheets. but the nexus worked in the other direction as well : struggling banks needed government assistance. we need to fix this “ doom loop ”. serving as a backstop for the single resolution fund, the european monetary fund could help in taking sovereigns out of the liability cascade. such a fiscal risk sharing would, however, require a further reduction of legacy risks in bank ’ s balance sheets. however, we need further steps. the bundesbank is proposing to reconsider the regulatory treatment of government bonds on bank balance sheets. we are calling for a phasing - out of the current zero - risk weighting and exposure limits for government bonds. third,

7 % the previous year. in the 2 / 7 bis - central bankers'speeches euro area, it went up by 5. 4 %. after 8. 4 % the previous year, this is the highest figure recorded since the launch of monetary union 25 years ago. however, these annual averages mask the marked decline in inflation over the course of the year. in germany, it fell from more than 9 % at the start of the year to less than 4 % at the end of the year, and in the euro area, from over 8 % to under 3 %. this was mainly due to lower energy prices. government relief measures and lower market prices for fuels were dampening factors here. food prices grew by double digits on average during the year. but here, too, we can see that price pressures eased significantly over the course of the year. core inflation excluding energy and food continued to rise in 2023, at 5. 1 % in germany and 4. 9 % in the euro area. services prices, in particular, rose more sharply than in the previous year. at first, pent - up demand for services that were unavailable during the pandemic still played a role here. think, for example, of travelling or eating out. this allowed some sectors to expand their profit margins. in addition, wages rose sharply in response to inflation, which also put pressure on prices. comparing today's situation with the situation a year ago, the nature of inflation has changed significantly. back then, inflation was mainly being fuelled by high energy and food prices. on an annual average for 2022, headline inflation was more than twice as high as core inflation. in the meantime, the picture has changed. of late, the core rate was significantly higher than the headline rate. what does this mean? energy and food prices play a key role in headline inflation. these prices typically fluctuate more strongly. by contrast, core inflation is much more stubborn and persistent. it is shaped largely by developments in wages, productivity and firms'profit margins. in january, euro area headline inflation was only around 1 percentage point higher than its pre - pandemic average. meanwhile, at 3. 3 %, core inflation was still 2 percentage points higher than its average rate between 1999 and 2019. when analysing the headline rate, we take a detailed look at core inflation. this is because, as a measure of underlying price pressures, core inflation helps us to assess future inflation developments. it