road ahead is challenging, and decisionmakers will need enough resolve to face down opposition to such reforms and get them implemented. 4. how can monetary policy help? yet this must not entice politicians to go for what some view as the “ easy way out ”. as you ’ ve probably already realised, i ’ m talking about the role of monetary policy. the ecb governing council agrees unanimously that monetary policy cannot solve the crisis. at best, it can buy time – but that is not its job. monetary policy has already helped substantially in preventing an escalation of the crisis. however, this has taken it a long way into uncharted – and dangerous – territory. it ’ s no secret that i am critical of the ecb ’ s government bond purchase programmes in particular. if eurosystem central banks buy government bonds issued by countries with poor credit ratings, this will distribute the risks of unsound fiscal policy among all the euro - area states. this weakens the no bail - out principle and entails redistribution, which is really the prerogative of fiscal policymakers. alongside the government bond purchase programmes, the sustained period of low interest rates is also controversial. incidentally, that is true of many countries outside the euro area, too. bis central bankers ’ speeches many savers find the low interest rates and negative real interest rates unfair. some enterprises, prospective homeowners and governments, on the other hand, probably see them as a blessing. they help them to service their debt and to fund investments cheaply, thus boosting economic activity. given the subdued medium - term inflation outlook, which is due to the weak macroeconomic backdrop and muted credit growth, the low interest rates are justified from a monetary policy perspective. yet low interest rates are not without their side - effects. while they are currently justified from a monetary policy perspective, we must not blind ourselves to reality : they tempt decisionmakers to delay reforms and necessary structural changes. risks to financial stability may build up, and these side - effects will increase the longer the phase of low interest rates continues. all this means that the interest rate environment also poses a challenge for cooperative banks ; a sustained period of low interest rates squeezes profit margins and means cost structures have to be adjusted. given the subdued medium - term outlook for inflation, the ecb governing council stated last week that it expected the key ecb interest rates to remain “ at present or lower levels for an extended period of time ”

regain responsibility for its own public finances. the government, parliament and electorate of each euro - area country must be bis central bankers ’ speeches responsible for ensuring that their economy is competitive and performs well, that the country generates growth and employment under its own steam, that its government finances are sustainable in the long term, and that excessive public deficits and debt are eliminated so that the country can absorb cyclical shocks without external assistance. far - reaching reforms are needed to achieve this level of stability. all this is challenging, but shouldn ’ t it really be a matter of course? after all, these are the prerequisites for a stable monetary union. to achieve these aims, to set the right incentives for sound policymaking, we need to lend more weight to the no bail - out principle again. the collective action clauses on recently issued government bonds are a step in the right direction, enabling a bail - in of bond creditors in the event of serious solvency problems. only then will the market have a disciplining effect on government budgets. but as the crisis has shown, the success of this approach of national responsibility hinges on one condition : ensuring that public finance problems do not derail the whole financial system. two things can at least help to ensure that this condition is fulfilled : in the medium term, banks should be obliged to set aside sufficient capital to back government bonds, and they should also be subject to limits on large exposures to governments. such limits have been applied as standard to corporate loans for a long time now. this would make banks more resilient to public finance problems, encouraging them to adjust their demand for government bonds more closely to the level of risk involved. any government with an unsound fiscal policy would face rising interest rates on its bonds. kenneth rogoff, former chief economist at the imf, even views adequate capital backing for government bonds as a far more effective debt brake than the rules of the fiscal compact. incidentally, putting an end to preferential treatment of government debt over corporate loans would also make lending to enterprises more attractive again. and you could all benefit from that, even though there are currently no signs of constraints on lending to enterprises in germany. quite the opposite : credit standards for corporate loans were actually loosened slightly in the first quarter of 2013. however, bank balance sheets don ’ t just reflect government finances but also developments in the real economy. the reforms i ’ ve described will therefore also make the banking system more stable. the