the success of emu. two factors have to be considered in this regard. first of all, in a monetary union which covers an area stretching from lapland in the north of finland to andalusia in the south of spain, we cannot expect complete homogeneity of the economic cycle or of economic conditions in a more general sense. therefore, it makes sense for the euro area member states to maintain control over the remaining tools of economic policy so as to be able, if necessary, to respond to developments which are particular to their own economies. on the other hand, when formulating their economic policies, euro area member states must give sufficient consideration to the impact that these policies will have on the rest of the euro area economy. this is particularly important in emu since euro area countries are no longer exposed to the discipline of financial markets to the same extent as used to be the case when they conducted their own autonomous monetary policies. prior to the introduction of the euro, unsustainable economic policies were penalised by the markets in the form of higher interest rates, substantial risk premia and exchange rate pressure. in emu, however, where financial markets take an increasingly euro area - wide focus and where the exchange rate risk associated with national currencies no longer exists, the effects of inappropriate policy choices in any one country tend to be largely spread across the entire euro area. only relatively small risk premia remain. for these reasons, the euro area member states are obliged to treat their economic policies as a matter of common concern and, to this end, a number of instruments and procedures have been developed to facilitate the monitoring and, if necessary, coordination of those policies that are still basically conducted at the national level. at the centre of this monitoring and coordination process lies the eu ’ s broad economic policy guidelines, which set out general orientations for the conduct of economic policies in the individual member states, covering areas such as public finances and tax policy as well as structural reform and market regulation. while these guidelines are not binding in themselves, their elaboration and discussion in european institutions and fora in which each of the member states is represented usually creates sufficient peer pressure to galvanise governments into appropriate policy action. while monitoring and peer pressure are very effective tools for assuring that the various economic policies of the member states move in the right direction, specifically in the area of budgetary policy, the emu framework not only specifies commonly agreed targets, but also sets a binding upper

yves mersch : towards a new collateral landscape speech by mr yves mersch, member of the executive board of the european central bank, at the 2nd joint central bank seminar on collateral and liquidity, hosted by the ecb and the deutsche bundesbank, hamburg, 17 september 2014. * * * introduction ladies and gentlemen, it is a pleasure to open the second day of the second joint central bank seminar on collateral and liquidity, hosted by the european central bank ( ecb ) and the deutsche bundesbank. i will reflect on the developments we are seeing in what is often referred to as the “ new collateral landscape ” and, in particular, consider the role central banks have played and can continue to play in order to help shape this new landscape. in this regard i will concentrate on the 1 ) eligibility, 2 ) availability and 3 ) mobility of collateral assets, as these elements represent some of the key subjects in the unfolding collateral landscape. looking back at developments in recent years, it is clear that the financial crisis and the accompanying regulatory reforms have assigned a more prominent role to collateral and placed greater emphasis on high - quality assets in general. we have seen a clear shift away from the use of unsecured funding in favour of secured funding in the money markets. this structural change alone has created new issues and challenges and it is having a significant impact on demand for collateral assets and the way monetary policy is implemented and transmitted. one of the key topics of discussion two years ago at the first joint central bank seminar on collateral and liquidity, was the growing demand for collateral. at that time, concerns were emerging that collateral was becoming scarcer, with expectations that demand would substantially outpace supply. these concerns were mainly fuelled by upcoming regulatory changes, the details of which were not fully elaborated at that time. another prominent topic was the importance of collateral for central banks. in response to the crisis, many central banks had broadened their collateral frameworks to support their counterparties in accessing central bank funding given the problems with the availability of market funding. taking the various elements together, there was general agreement that demand for collateral assets would indeed increase in the forthcoming years and hence collateral would become relatively scarcer, although an absolute collateral scarcity was unlikely. a subsequent study carried out by the basel committee on the global financial system ( the cgfs ) and published in 2013 reconfirmed this view, noting that while this increase in demand could lead to “ temporary shortages in some