is known that monetary stability alone will naturally not suffice? or is it to be possible to subordinate the target of monetary stability to other objectives ( such as boosting employment ), depending on the situation? ( then of course - as past experience has shown - there is a risk of forfeiting both in the end, i. e. of ending up with higher unemployment and higher inflation alike. ) the governments which negotiated the maastricht treaty opted for the first answer ; that is to say ( no more and no less ), for basically unpolitical money. assigning this mandate of an independent central bank is quite consistent, especially in a supranational context in which there is no room any longer for divergent national preferences. by their “ yes ” votes, national parliaments have unambiguously approved the treaty. after all, the independence of the european central bank is not shamefacedly concealed in the “ small print ”. it is at the very heart of the treaty. vi lord dahrendorf has criticised emu, saying that it is actually irrelevant to the great topics of the epoch and only diverts attention from the really important issues. profoundly though i agree with him about the existence and urgency of many great topics, as a central banker i find it rather hard to view emu as an irrelevance. what is true is certainly that europe is reaching the crossroads. and emu is clearly not a sufficient answer to everything. europe is faced with major challenges, namely with the three es : enlargement, employment and emu. enlargement mainly raises the question of how europe can remain operational and viable with 20 members and more. of course, i know that some experienced practitioners remain cool and argue as follows on europe : well, the reform of the institutions virtually failed even before any round of enlargement. and it went on for all that. that may be true in a certain sense. but it will result precisely in that often - deplored muddling - through, in which the question of what europe is doing, and how, is settled more by historical accidents than by rational economic decisions. and the eu must not suffer the same fate as the dinosaurs. the greatest challenge facing europe is doubtless the issue of employment - at least on the continent. especially since employment is not only a matter of the right deployment of the macroeconomic instruments - as in textbook economics. in germany, and also in some

it ever had before. it had to find new ways to use existing tools, and even invent entirely new ones. all this made some people uneasy. particularly here in germany, people see the new role and the new tools of the ecb as something risky. they are concerned that the low interest rates might destroy future wealth and ruin their retirement plans. outside germany, however, the ecb has won respect for its forceful response to the crisis. people are focusing on the fact that the ecb helped to prevent worse things from happening. and some might even think that it could have done more. so which view is right? did the ecb save the euro and protect europe from a crisis that could have been much worse? or has it overreached and entered a dead - end road where it will eventually get stuck? this is a tricky question because, while it seems to focus on the past, it ’ s the future which holds the answer. so let us do three things. first, let ’ s look back and ask what has happened so far. second, let ’ s take a look at the present and ask where we are right now. and third, let ’ s look ahead and ask 1 / 6 bis central bankers'speeches where we go from here. the past – thinking outside the ( tool ) box so the past is where we begin. in this case, 15 september 2008 – the day lehman brothers failed. and that was the death blow for something that was already severely wounded : trust. banks around the world started worrying about their exposures to what were known as subprime mortgage loans. through new financial instruments, the risks from these loans had been spread across the banking sector – in very opaque ways. banks did not know how many of these risks were on the balance sheets of their business partners. and they did not know how to price these risks on their own balance sheets. trust disappeared ; banks stopped lending to each other and the interbank market broke down. there was a high risk that even healthy banks would run short of liquidity and fail. that was a serious problem, given how important banks are for the economy. a meltdown of the banking system would have been fatal for the economy. and it would also have been a problem for monetary policy and price stability. after all, the banks transmit standard monetary policy to the real economy. at that point, the ecb deployed one of the classic tools of central banking. it stepped in as lend