This would eliminate the possibility of any discretionary domestic monetary policy action since the domestic component of the monetary base could only change in response to a change in the foreign currency component of the base. Despite the only limited experience with the currency board arrangement to date, the experience would nevertheless allow us to declare it, provisionally, to be a success.
All of us here in this room will recall government rescues in several countries of the euro area – Germany being one of them. With these gloomy episodes in mind, it is entirely conceivable that in severe cases, bank rescues can overburden a country’s fiscal capacities. We have already reached several milestones on the road towards eliminating this channel of the sovereign-bank nexus.