in favour of introducing such “ eurobonds ”, understood as guaranteed government bonds on a joint and several basis, in the present circumstances. we note that the aim is to support the development of euro area bond markets, as well as at providing a possible mechanism to alleviate or resolve the ongoing sovereign debt crisis. with respect to supporting the euro area bond market, the main advantage could be cost savings from reducing the liquidity premium in the bond markets. this could arise particularly if eurobonds gained benchmark status, comparable for instance to us treasury bonds. as regards the impact on sovereign debt developments, moving to eurobonds would remove the financial market pressure in the short term but, if not replaced by new mechanisms, fundamentally reduce incentives for sound fiscal policies. in our institutional set - up, fiscal discipline is induced via existing domestic provisions ; the fundamental institutional framework of governance ( the treaty and the stability and growth pact ) and the assessment by savers and investors. jointly guaranteed bonds would not permit savers and investors to assess fiscal policies of individual countries. as long as we do not have a political federation with a federal budget, bis central bankers ’ speeches this would create an incentive problem. it would impair the incentives for fiscal prudence at the domestic level. consequently, eurobonds would be the natural counterpart if national fiscal competences were clearly at the level of a union which would be a federation. in the present institutional framework we need to make very important progress in the collegial governance and surveillance of fiscal policies which remain national. dear honourable members, i thank you for your attention and am at your disposal for questions. bis central bankers ’ speeches

behalf of the governing council, on the occasion of our last monetary policy decision meeting earlier this month. as regards liquidity - providing operations, the governing council decided to conduct them in the second quarter of 2011 on the same conditions as in the first quarter of 2011. this means that we will continue to apply fixed - rate tender procedures with full allotment in all our refinancing operations at least until mid - july. ii. interaction between banks and sovereign debt let me now turn to the specific topics you have asked me to address and start with sovereign debt. i should like to emphasise once again that the right way to avoid the risk of sovereign debt crises in an economic and monetary union is through sound national macroeconomic policies and strengthened economic governance. at the same time, the governments have considered that a permanent crisis management mechanism would be useful. from the side of the european central bank, the design of such a mechanism is essential for it to provide a positive contribution to financial stability in the euro area as a whole. i would like to highlight two aspects : first, the mechanism may in no way weaken the incentives for sound fiscal and macroeconomic policies pursued in all member states. it must in particular not weaken incentives for preemptive fiscal and macroeconomic adjustment by countries concerned, thereby avoiding moral hazard. second, given that the euro area is characterised by an exceptionally high degree of economic and financial integration among countries, the mechanism should be able to employ a range of instruments to be effective in stemming against contagion in situations of acute market instability. if indispensable, supporting countries while still keeping some market access, may be an appropriate way and would imply a prudent use of funds. in this context, i continue to consider secondary market interventions as a helpful tool in this context. regarding the institutional method to set up the esm, the ecb, like the parliament, supports the largest possible recourse to the union method. it would welcome that, on the basis of the experience gained, the esm could become a union mechanism at the appropriate point in time. in the meantime, the ecb encourages that the assessment of circumstances leading to the activation of the esm and the conditions on financial assistance entail an appropriate involvement of union institutions, thus benefiting from their expertise and their union - wide perspective. turning to the issue of bank resolution, the presence of sound bank resolution mechanisms, limiting the costs associated to a bank failure in the case of a cross