let us call it – “ pre - lehman ” levels. expecting “ pre - crisis ” - levels to make a comeback – the time when risk was significantly underestimated – is neither realistic nor desirable. however, sustainable relaxation in the inter - bank money markets requires a sustainable return of confidence in the financial markets. in order to achieve this aim, it is necessary that the process of restoring banks ’ balance sheets continues, supported by public stabilisation funds. emu and the financial crisis for european monetary union, the financial crisis is certainly posing the greatest challenge in its history. when we recently celebrated the tenth anniversary of the single currency ’ s inception, it was often stated that the first ten years of the euro were a success story with regard to price stability, trade and financial integration in europe. however, it was also stated that the years ahead are likely to become even more challenging. one could say that emu is reaching puberty – if you have children, you will know what i mean. nonetheless, the value of monetary union has never been greater than during the financial crisis. try to imagine what would have happened without the single currency! probably, foreign exchange markets within the single market would have been driven by speculative activities. think of what happened in the early 1990s. currency fluctuations would aggravate both the financial crisis and real economic tensions – and do not forget the political turbulence implied by such currency tensions. it has been clear from the beginning of monetary union that there has been a greater emphasis on the responsibility for fiscal policies, wage policies and structural policies, which remains at the national level. in a nutshell, monetary union requires flexible labour markets and sound public finances – this holds true especially during times of crisis. with regard to fiscal policy, respecting the provisions of the stability and growth pact is of the essence. what is needed is a credible and strong commitment to reducing excessive deficits and to returning to the path of consolidation. rising cds premia on sovereign bonds have induced speculation about potential defaults on the part of emu countries. any concerns in this regard are unfounded and only purely hypothetical. while it is in general welcome that financial markets punish unsustainable public finances, it has to be acknowledged that even euro area member states with high yield spreads are currently facing favourable refinancing conditions given the unprecedented low interest rates. it should be emphasised that the “ no - bail - out ” rule, as stipulated in the ec treaty, is an indispen

a period of low inflation. does that mean that the governing council will run out the whole arsenal of countermeasures if, for example, new economic or geopolitical circumstances cause the rate of inflation not to converge on the desired benchmark more rapidly, as is expected at the moment? i don ’ t think so, even though quite a number of market participants are already hoping for a broadly ranging bond purchase programme. such a programme is, of course, one instrument in the set that is, in principle, at the disposal of a central bank. however, the preconditions for the use of such a form of monetary policy intervention need to be particularly stringent, given that the side effects are singularly pronounced. too low yields on government and corporate bonds could create the wrong incentives and thus pose a significant risk. the underlying monetary policy reasoning behind its use must therefore be beyond question, especially in a monetary union comprising 18, and soon 19, sovereign bis central bankers ’ speeches countries. such an instrument could only be considered in a true emergency, for example in the case of imminent deflation. such risks, however, are currently neither discernible nor expected. what is also being discussed is the revitalisation of the market for securitised loans. that is certainly a worthy goal, given that asset - backed securities ( abss ) have been exceedingly demonised since the outbreak of the financial crisis. they certainly played a role in causing the crisis, but it must be borne in mind that not every case of securitisation is the same. what i am thinking of in this respect are not re - securitisation positions and synthetic securitisation transactions, but rather of very simply and clearly constructed products that are far less risky. the rate of default for european securitisations that are underpinned by sme loans, for instance, stands at around 0. 1 %. since the onset of the crisis, the average default rate for europe as a whole has been between 0. 6 % and 1. 5 %. cause for concern are rather the default rates in the united states, which stood at between 9. 3 % and 18. 4 % over the same period. against this background, the governing council has decided, in cooperation with other relevant institutions, to gradually revitalise the market for abss, in particular that for securities backed by loans to smes. for me, that means looking once more at the capital