taxes and social security contributions, different manufacturing structures, diverging trends in corporate financing and differences in the national transmission channels of monetary policy can alter the effect of monetary policy measures on the real economy. in future, under a common exchange rate and monetary policy with identical official interest rates and an identical liquidity supply, these differences among the participating countries can only be countered by means of flexible national fiscal, structural and wage policy measures. it is, of course, tempting for the politicians and social partners, caught up in their many daily conflicts and confrontations, to call for a more expansionary monetary policy, as this will seemingly enable an easier solution of conflicts. yet monetary stability is – especially from the german perspective – precisely the purpose and worth of an independent central bank insulated from the multitude of political conflicts, as has been so convincingly laid down in the maastricht treaty. solving problems at the expense of monetary stability is invariably an exercise in self - deception, with many counterproductive results. inflationary monetary policy exacerbates growth and employment problems instead of solving them, at least over the medium term. the unbearably high unemployment rate in large parts of europe presents the key economic policy problem from the german perspective, too. a full employment equilibrium in the participating countries is characterised by varying national labour costs corresponding to national labour productivity. thus, a rapid equalisation of the nominal wages in the participating countries is not realistic, as the unemployment rate threatens to continue rising in countries which raise the wage level above the level of labour productivity. increases in negotiated wages and settlements should therefore conform to the national employment situation and the growth rate of labour productivity. these considerations lead to the conclusion that it does not make sense to harmonise the pay - rate policies within europe. this would complicate the necessary variation of wages in the euro area and impair the necessary flexibility of wage structures. thus, for the euro to be a success, it is imperative that these inevitable consequences of the single currency be understood and accepted by all participating countries and that the necessary measures be carried out. a single european monetary policy which cannot make exceptions for special national developments and interests must be accepted and taken into consideration in the shaping of national economic and fiscal policy. the implementation of a supranational european monetary policy will be all the easier the more the independence of the european central bank is respected by the european bodies and especially by the residents of the euro area. to a very large extent, the

which has highlighted the fact that it is not enough to safeguard the stability of each bank individually. if we want to address the causes of the financial crisis in full, supervision has to be taken one step further. in particular, systemic risk has to be identified and guarded against. this raises new questions, such as how systemic risk can be identified and whether the systemic relevance of an institution should be considered by introducing capital surcharges for systemically important banks. once again these issues, which enter new fields of financial supervision, are being addressed by researchers, and different approaches are under discussion. when trying to identify systemic risk, a crucial point is to find adequate measures for indicating economic stress. the paper by huang, zhou and zhu which will be presented at this conference contains an approach for measuring the systemic risk of a financial system using financial market data. compared with indicators derived from banks ’ balance sheets, financial market data have the advantage that they are available on a timely basis and are forward - looking. however, market - based risk measures are much more influenced by market movements than balance sheet related data. consequently its suitability has to be reviewed more often. whereas huang, zhou and zhu concentrate in their paper on the identification of systemic risk and the potential downside risk to a group of major financial institutions, adrian and brunnermeier go one step further in the paper they presented today. in their approach systemic risk of a financial institution is first identified and then directly incorporated into the regulatory framework. as justified as the intention to regulate banks and financial institutions according to their contribution to systemic risk may be, it is even more difficult to design and implement a rule that puts this into practice. here, too, it is crucial to identify appropriate indicators of the contribution to systemic risk. the attendant risk – which can never be eliminated entirely – is that regulation focuses in too mechanical a manner on prominent risk indicators while overlooking other, less obvious ones. last not least there is a resulting necessity for a permanent revision of the regulatory framework that will allow supervisory authorities to respond flexibly to market developments. this means that the organisational aspects of global financial regulation have a key role to play in strengthening systemic risk control and safeguarding global financial stability. in this respect, the initiatives and action being taken at the european and global levels to enhance macroprudential supervision are to be welcomed. in the eu, the planned foundation of a european systemic risk board ( esrb ) – consisting of representatives from central banks, supervisors