##desbank, the potential macroeconomic impact of us tax reform, monthly report, february 2018, pp. 14 – 16. 9 / 10 bis central bankers'speeches 8 see g. felbermayr ( 2018 ), beobachtungen zur us - leistungsbilanz, ifo schnelldienst 9 / 2018. 9 g. felbermayr ( 2018 ), zolle im transatlantischen handel : worauf, wie viel und wie gerecht?, ifo schnelldienst 6 / 2018, p. 8. 10 see l. cernat, d. gerard, o. guinea and l. isella ( 2018 ), consumer benefits from eu trade liberalisation : how much did we save since the uruguay round?, european commission, dg trade, chief economist note, no 1. 11 quoted in n. doll, “ protektionismus und abschottung haben keine zukunft ", www. welt. de / wirtschaft / article181410812 / bdi - kritisiert - regierung - protektionismus - und - abschottung - habenkeine - zukunft. html, 4 september 2018. 12 c. fuest ( 2018 ), der dritte systemwettbewerb, frankfurter allgemeine zeitung, 27 july 2018, p. 18. 13 see deutsche bundesbank, on the weakness of global trade, monthly report, march 2016, pp. 13 – 35. 14 see deutsche bundesbank, the realignment of the chinese economy and its global implications, monthly report, july 2018, pp. 39 – 56. 15 f. a. von hayek, inaugural lecture on 18 june 1962 at the university of freiburg. 16 j. - c. juncker, state of the union 2018 – the hour of european sovereignty, speech given on 12 september 2018. 17 c. fuest, ein europaischer wahrungsfonds muss die steuerzahler schutzen, wirtschaftswoche, 15 december 2017, p. 68. 18 see f. heinemann ( 2018 ), how could the stability and growth pact be simplified?, european parliament, in - depth analysis, euro area scrutiny. 19 k. r. popper, the open society and its enemies

jens weidmann : breaking the sovereign - banking nexus guest article by dr jens weidmann, president of the deutsche bundesbank, entitled “ stop encouraging banks to load up on state debt ” in the financial times, published on 1 october 2013. * * * it appears to be another case of the “ principle of unripe time ” – the notion coined by the late english classicist f. m. cornford “ that people should not do at the present moment what they think right at the moment, because the moment at which they think it right has not yet arrived ”. the financial and sovereign debt crisis have underpinned the importance of breaking the disastrous sovereign - banking nexus – in which shaky bank balance sheets degrade the solvency of their sovereigns, and vice versa. a european banking union is an important step towards escaping this deadly embrace. to this end, and to complement the banking union, a reassessment of the regulatory treatment of sovereign exposures of financial institutions is crucial. the current and incoming regulatory framework implies preferential treatment of sovereign exposures in various forms. while bank exposures to a single counterparty are limited, in principle, to a quarter of their eligible capital, exposures to sovereigns are exempted from that large exposures regime. sovereign exposures are also privileged by low or zero capital requirements. preferential regulatory treatment makes it highly attractive for financial institutions to invest in government bonds – and those of their home countries in particular. during the crisis, this has become more attractive still. the share of euro - area sovereign bonds in total bank assets in the eurozone increased over the past five years by one - third – from 4 per cent to 5. 3. and in most countries the home bias, which decreased over the first decade of monetary union, increased again during the crisis. average figures mask important differences from bank to bank and country to country. recent studies, including one by the bundesbank, find that larger banks, less capitalised banks and banks that are dependent on wholesale funding invest more in sovereign bonds than others. hence, the more vulnerable banks are, the more they expose themselves to sovereign debt. weak banks invest in high - yield sovereign bonds and refinance at currently low interest rates. such “ carry trades ” sustain the low profitability of those banks and postpone necessary adjustments of their business model. the reasons for the increased exposures of banks to their domestic sovereigns may vary : the search for yield