labour substantially. the sooner we start implementing such reforms, the better. this will give us more room for manoeuvre. danmarks nationalbank eagerly awaits the forthcoming plan that will chart denmark ’ s economic policy course until 2020. confidence in the danish economy will be strengthened, if broad agreement can at least be reached on the scope of the challenge. * * * the financial system is recovering. if the danish economy develops in line with our expectations, the banks will generally be resilient to the coming losses. but in view of uncertainty concerning the economic outlook, several banks would be wise to build up further buffers. * * * now that the danish banks are emerging from the crisis, it is also time to consider how we can prepare ourselves better for future financial crises. at the end of september the general government guarantee covering the banks ’ unsecured creditors expired. happily for us all, this took place without major problems. but the sector is not yet standing on its own two feet. the government has injected kr. 46 billion in subordinated capital and given guarantee commitments for a further kr. 364 billion. as these schemes expire, they must be replaced by market - based solutions. at the same time, the banks must prepare for tighter regulation and supervision in future. the challenge is to ensure a robust financial system that can survive without government assistance next time a crisis occurs. credit will be more expensive and harder to come by. banks, companies and households will all have to accept a higher equity share when operating a business or purchasing a home. this is not a purely danish challenge. many international forums are working hard to define common standards for the financial system to make it more robust and self - contained. however, the future international standards may not be sufficient to ensure a robust and selfcontained danish financial system in due time. or perhaps they will not take danish experience into account to a sufficient degree. let me mention a few areas that will be important to consider in a danish context. the basel committee ’ s proposals for new liquidity rules and the status of mortgage bonds when calculating the new liquidity buffer have for good reason been prominent in the danish debate. efforts are still underway to amend key elements of the rules. but i think the sector will have to face the fact that self issued bonds cannot be included in the calculations. and after all, if you want a sound liquidity buffer, it does actually make sense that the value of this buffer is

jens thomsen : how does the individual member state design an appropriate stabilisation policy in a monetary union? panel statement by mr jens thomsen, member of the board of governors of the national bank of denmark, at the 3rd ecb central banking conference, frankfurt, 22 october 2004. * * * having pursued a fixed - exchange - rate policy for many years, denmark has gained extensive experience in this area. the present central rate was fixed in january 1987. some of this experience is also relevant in relation to the new eu member states ’ participation in erm ii. in my contribution, i will focus not only on erm ii, but also on the broader question : how does the individual member state design an appropriate stabilisation policy in a monetary union? this means that the conclusions drawn will be applicable to both new and old eu member states. in emu, there is obviously no national monetary policy. the national stabilisation policy must therefore be based on alternative instruments. erm ii is an integral part of the emu process. for as long as the broad fluctuation band is utilised, monetary policy may still form part of a country ’ s stabilisation policy. however, it cannot stand alone. as i will describe, its impact will diminish as the date of emu entry approaches. all new eu member states have stated that they want to be in erm ii for as short a period as possible. this means that fiscal and structural policies - the only national policy instruments in emu - should already be appropriately designed within erm ii. this will ensure, among other things, that the terms of the stability and growth pact are met or are, at least, immediately in sight. this is a simple but important point to always keep in mind. denmark has decided to stabilise its exchange rate close to the central rate. on account of the high degree of convergence, the stability of the danish krone in the market, and the sustained stabilityoriented economic policy, denmark participates in erm ii with a narrow fluctuation band of + / −2. 25 per cent. this band is, however, far from utilised. in other words, fiscal and structural policies are the only stabilisation - policy instruments available to denmark - as will also be the case in emu. this means that the exchange rate - and the exchange rate alone - determines the interest - rate spread. intervention in the foreign - exchange market is also