be achieved in an orderly way only through an agreement between creditors and debtors. other forms of constrained action, on the creditor or on the debtor side, are bound to lead to litigations and produce disorderly effects on financial markets. in this respect, the adoption of collective action clauses by the euro area member states would make it easier for creditors and debtors to agree on a fair burdensharing. this was the conclusion of the discussions in the context of the imf and can be further explored at european level. another way to prevent market participants from being bailed out is to use the funds made available from the official support mechanism to purchase debt on the secondary market, at the prevailing market discount, rather than reimbursing the maturing debt at the nominal value. in this way holders of debt instruments willing to sell would have to accept the market haircut. this possibility is envisaged in the ecb ’ s proposals. to conclude, the european union is a community of law, subscribed to by the member states in which pacta sunt servanda. this refers to all the pacts, starting from fiscal discipline in the member states to the commitment of the member states to pay their debts. in my view, we have to be very careful in considering exemptions, such as providing the possibility for countries to unilaterally modifying the value of their debt contracts. the euro, and its underlying institutional construction, is about respect for the law. if any changes are to be made, they should be to strengthen these principles rather than to provide exemptions – dangerous exemptions which could undermine the stability and cohesion of the whole union. thank you for your attention. chart 1 : tensions in euro area selected intra - euro area spreads against germany ( 10y ) source : bloomberg chart 2 : tensions in euro area selected government credit default swaps ( 5y ) source : bloomberg chart 3 : dysfunction in the bond markets daily change in bond prices ; in percent source : bloomberg. note : on 10 may, change in bond prices rose to + 35 % for greece and + 14 % for portugal. chart 4 : credit risk of eu banking system source : bloomberg

to overturn in its decisions the assessment of the commission. 3. more independence in the collection, verification and assessment of the fiscal data and fiscal analysis at the level of the commission. 4. more emphasis on public debt developments, as the treaty foresees. 5. quasi - automaticity of sanctions in case of breaches of the rules, including the provision of both so - called procedural and financial sanctions. the commission ’ s communications of 12 may and 30 june does not go far enough in the ecb ’ s view on two counts : 1. they thus far remain silent on how the independence of the fiscal assessment and the independence and quality assessment of the statistical data collection can be made more effective within the commission. in particular, we would like to see some of the procedures currently in force in dg competition at the level of the technical assessment and the role of the commissioner in the college also being applied for dg ecfin and its commissioner. as regards statistics, the new council regulation of july 2010 should be followed up with deeds ; in particular with more resources devoted to fiscal data and its verification by eurostat. 2. the commission ideas currently on the table provide too little in terms of streamlining the procedures and hence making them more effective. we have seen many times in the past that procedures are too lengthy and laborious before effective action can be undertaken to incentivise or enforce on member states a correction in their fiscal developments. so far, procedures have been launched only on the basis of the notification by the member states. it could be envisaged to also launch them on the basis of an assessment or a forward looking assessment by the commission. had this been done in the case of greece, many problems could have been avoided or at least reduced. on the second building block – broader macroeconomic surveillance – we see a strong need for making a quantum leap, given the large spillovers from the macroeconomic policies of one country on all other participating countries in the single currency area. accordingly, the ecb proposes the creation of an alert mechanism based on a clear and limited set of indicators that identifies unsustainable policies at a sufficiently early stage. we would also like to see put in place a procedure for the correction of macroeconomic imbalances with a preventive and a corrective arm which includes graduated enforcement steps to ensure compliance, including sanctions. again, the commission ideas voiced in its communication of 30 june go in the right direction but are not yet ambitious enough