Dr Jens Weidmann, President of the Deutsche Bundesbank, gave a speech at Chatham House in London on 28 March, 2012.
"We must not just contain the crisis, we must resolve it. To achieve this goal, we must address two central issues: the problem of excessive public debt and the problem of macro-economic imbalances.
Countries with current account deficits and excessive public debt must act. They must implement structural reforms and they must consolidate their budgets to get back onto a stable growth path. Of course, adjustment is a huge challenge for the people in these countries but the status quo is clearly unsustainable, and doing nothing will lead to even sharper corrections. By contrast, taking up the challenge will open the doors to a more stable and more prosperous future."
Mr Weidmann focuses in his speech on the Member States. "This is not to deny that an overhaul of the institutional framework of monetary union is equally pressing. Member States have made it clear that they want to retain their autonomy in fiscal policy. But in that case we need stricter rules to counter the deficit bias. Some progress has been made on this issue. Now, it is decisive that the rules are applied rigorously.
In addition, placing monetary union on a sounder footing is closely linked to regulatory reforms in the financial system... Admittedly, the crisis has opened our eyes to structural flaws at many levels. But this sobering experience has also provided the impetus to correct these shortcomings. The time has come to move from containing the crisis to resolving it. If we have the will to make the right choices, we will be able to rebalance Europe and lay the foundation for a stronger, more stable monetary union."
Full speech
© BIS - Bank for International Settlements
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