balance, however, the relevant powers would have to be transferred along with the risks to the european level. having said that, i can identify very few member states that display a willingness to forgo national competences. quite the opposite : over the past few weeks it has again become apparent that those who may call the loudest for greater risk sharing explicitly insist on their national sovereignty in fiscal policy matters. and that highlights the current dilemma : demanding greater solidarity of the community and, at the same time, rejecting any transfer of competences to the community does not match up. the 4 / 7 bis central bankers'speeches saying “ you can ’ t have your cake and eat it too ” also applies to this trade - off between national sovereignty and risk sharing. 4 a closer look at some instructions ladies and gentlemen at last week ’ s euro summit in brussels, the heads of state or government identified the need for further discussion in many areas with regard to the framework underpinning the emu. this has prompted a great deal of criticism and calls for faster decisions. but i am in favour of putting thoroughness before speed. further debate ought to take priority over preconceptions or hasty decisions. nevertheless, the governments confirmed that further reductions in risks are necessary before the banking union can be completed by introducing the european deposit insurance scheme ( edis ). the bundesbank has long recommended that risks which banks incurred under national responsibility should not be retroactively mutualised through the edis. to a casual observer the proper sequencing has always been a matter of common sense. in the end, when you have just crashed your car, it ’ s too late to take out insurance with comprehensive coverage. obviously, reducing risks requires addressing the legacy of non - performing loans on banks ’ balance sheets. but we cannot stop there. going forward, more needs to be done to rein in future risks by severing the sovereign - bank nexus. it is crucial that we abandon the preferential treatment of sovereign debt in banking regulation. if this matter is not resolved, further steps towards completing the banking union would imply a significant increase in fiscal risk sharing. in the coming months, discussions will also focus on possible new fiscal tools. at this point, allow me a general word of caution. we need to be mindful of public debt : higher budget deficits today mean higher taxes tomorrow. given the burden of government debt in the euro area, the creation of additional possibilities for borrowing is precisely what we should not be

the commission projects that this will be achieved this year for the first time. that would be good news indeed, but it is no cause for jubilation, as the stability and growth pact calls for more to be achieved in two respects. first, the 3 % mark is not a benchmark, but a ceiling. fiscal policy should be focused on the medium - term objective, which requires that member states have a structurally close - to - balance budget. consequently, we have to consider the economic environment when assessing fiscal policy. and the underlying conditions have improved remarkably in recent years : the robust economic upturn means higher revenues from taxes or social security contributions and lower outlays for unemployment benefits. moreover, government interest spending has fallen thanks to low interest rates. according to bundesbank calculations, this has generated savings of approximately one trillion euros in the euro area over nine years. 1 in times such as these, fiscal policy should not be satisfied with merely adhering to the 3 % threshold : it should be aiming for the zero mark or surpluses. that would give governments the leeway they need to take fiscal measures in the future, when economies may enter another downturn. 2 / 7 bis central bankers'speeches it would also help to reduce the overall debt burden, which – and that is my second point – is much too high in some countries. as things currently stand, just 7 out of 19 euro area member states meet the debt ceiling of 60 % of gdp. for the euro area as a whole, debt stood at 87 % of gdp last year. and these figures do not account for implicit future burdens in connection with demographic change. when considering such implicit debt, public finances in most countries – and certainly including germany – face demanding challenges. elevated debt levels must not become permanent, also because persistent breaches harm the binding effect of the common fiscal rules. benjamin franklin already warned us that it is easier to prevent bad habits than to break them. moreover, high levels of government debt limit the fiscal room for manoeuvre. they make it difficult to channel government spending towards investment, weaken resilience and thereby raise uncertainty, which is very likely to dampen economic growth in the long term. and this brings us to the last basic ingredient for a stable monetary union : competitive economies which are resilient enough to withstand or recover from adverse shocks. unlike countries with their own currency, euro area member states cannot resort to the instruments of monetary policy and exchange rate flexibility when they