as you may well know, the british pound and italia lira were subsequently forced to abandon the exchange rate mechanism. the existence of exchange rate crises and speculative attacks thus serves as clear empirical evidence in favour of the uncovered interest rate parity. in addition, recent empirical studies based on advanced econometric techniques and using intraday data have shown that when the historical data are used properly the result may support the uncovered interest rate parity concept. the exchange rate plays a crucial role for the czech economy as well and is therefore an important part of our forecasting devices. and yes, the core forecasting model we use relies on the uncovered interest rate parity equation. it is also true that the movements of the exchange rate observed recently have surprised us to a certain extent. these surprises, however, should be taken as economic shocks that no economic relationship could have predicted. we central bankers are not very interested in short - term volatilities, but we should not miss breaks in the business cycle. for this task we need a relationship that has an economic grounding in the profitmaximising behaviour of the financial markets. and this is what the uncovered interest rate parity certainly has, and what the statistical models lack. ladies and gentlemen, allow me to wish to all of us fewer exchange rate surprises and the best possible forecasts!

my definition of a clear hegemon is : it should have the right to set the rules and to force others to behave accordingly, the right to enforce the rules. and it has to have the right even to breach the rules itself and still not allow the others to breach the very same rules. but this is not true for germany after the introduction of the euro. to put it simply, eurozone membership turned germany from a hegemon into just one important player in rule making and practical policy making. if i use a simple analogy from the world of motoring, in the german mark era germany controlled the steering wheel, pedals and gearstick of the monetary vehicle, whereas in the euro era – and especially since the crisis broke out – it has had a firm foot only on the brake. and only sometimes, one must add. why is that? well, in a euro - style monetary union, many important issues are put to a vote ( or complicated negotiations ), and votes and negotiations typically have different outcomes than dictates or decisions of a hegemon. if there had ever been a notion that the euro could be as depoliticised as the former mark, it simply had to fail. in reality it had to be more politicised by definition. the euro could not be a depoliticised german mark, because in many key decisions and respects it had to be a rather more politicised french franc, italian bis central bankers ’ speeches lira or spanish peseta. otherwise, it seems to me, it could not have come into being in the existing set - up in the first place. a bitter remark : allan meltzer once said the ecb ’ s biggest advantage over the us federal reserve system is that it doesn ’ t have a government standing against it. this, he believes, is the best safeguard of the ecb ’ s independence. but the opposite and rather bitter argument can also be made. the ecb at times has to stand against all 17 governments of the eurozone member states. i do not want to talk about nominal and real convergence, about rigidities, oca arguments etc. rather, let ’ s take one example. many complain that it is so hard to make real macroeconomic adjustments within the current eurozone, among its individual states. but if i understand monetary history correctly, the eurozone was created partly to make standard adjustments more complicated. the fear of constant “ humiliating devaluations ”