a target to be met sometime in the future. and by then things will have improved, or so we assume in our planning. now the structural balance will be an annual target which can only be deviated from in exceptional circumstances or in the event of a severe economic downturn. will the new fiscal compact mitigate the debt crisis? first and foremost, the new fiscal compact is aimed at preventing a recurrence of the present situation in the euro area – with a debt crisis in several euro area member states that is threatening to spread. here it could be argued that serious observance of the existing rules combined with responsible macroeconomic and macroprudential policies could have provided the same result. the fiscal compact and other initiatives will ensure that deviations are to a larger extent exposed – and addressed. bis central bankers ’ speeches so agreement between the euro area member states and other member states on the fiscal compact may help to boost market confidence in europe in general. but the present debt crisis should primarily be addressed through direct measures in the member states in question and via the international assistance programmes already in place. so what are the advantages of the compact? the main advantages of aiming for and realising a structural balance are that growth in government debt over the business cycle is curbed and that each member state has fiscal scope to stimulate its economy in a recession. the foundations must be laid when the economy is not under pressure. the fiscal scope is greater if the structural balance is positive. but it is important to realise that aiming for sound public finances is not enough. wage and productivity developments and other structural factors impacting on competitiveness, the labour market and the balance of payments must also contribute to a sustainable development. this is also an element of fiscal policy. viewed in a broader perspective, the fiscal compact – together with the new six - pack, which focuses on issues such as member states ’ broad macroeconomic development and tightens the sanctions regime against euro area member states – is a prerequisite for preventing future debt crises that bring the coherence of the euro area into question. like other eu member states, denmark has benefitted hugely from the european project, including the single market and the euro. this project cannot be rolled back without substantial costs. so it is very much in denmark ’ s interest that the european project does not strand. are there no drawbacks or reservations in relation to the fiscal compact? in an ideal world, i believe that each member state should be free to conduct responsible economic

jens thomsen : government bond markets in 2009 speech by mr jens thomsen, member of the board of governors of the national bank of denmark and chairman of the economic and financial committee, sub - committee on eu government bonds and bills markets, 1 at the european government bond summit, brussels, 5 november 2009. * 1. * * introduction i am delighted to be here tonight to offer my view on the development in the financial markets. a little more than a year ago the financial markets were frozen and there was a well - founded concern regarding the financial and economic outlook. 2009 has indeed proven to be challenging in many ways. in the period after lehman brothers collapse the international financial crisis escalated. as a consequence the spread between uncollateralised and collateralised money - market interest rates tripled, cf. chart 1. most countries launched extensive rescue packages to mitigate the crisis. the interventions stopped the free fall of the financial system. against the backdrop of weaker economic outlook governments introduced fiscal stimulus and monetary policies have been relaxed substantially. central banks have reduced the policy interest rate sharply and provided extensive liquidity to banks and resorted to unconventional tools to ease monetary policy, which has supported financial stability. the mandate of the sub - committee is to aim at promoting further the integration and better functioning of eu government bonds and bills markets thereby impacting positively on the financial markets as a whole. 2. government finances the global economic prospects were gloomy at the beginning of the year and the financial crisis has had greater real economic repercussions than expected, which triggered the adoption of large stimulus packages worldwide. as a result of lower government revenue and rapidly rising expenses, public finances have deteriorated. in the course of 2009 most countries have revised their forecast of government deficits to record highs and government finances are expected to be under extensive pressure in the coming years. government debt issuance in the euro zone is expected to be around 925 billion euro in 2009, which is an increase of around 30 per cent. in 2010, issuance is expected to be even higher. at the same time the role of dmos has changed as a result of the financial crisis. the special status of government securities as risk - free assets has been highlighted, and dmos played a key role in connection with the financing of rescue packages. 3. government bond markets primary markets the primary markets have worked reasonably well in light of the severity of the financial and economic crisis. the uncertainty in the financial markets, coupled with risk avers