Under pressure from the market, a number of countries have therefore initiated far reaching multi-year programs, which at least partly address structural problems. Moreover, the way the EU as an institution deals with public finances will change. As many European officials have pointed out, in 2004, it was not Greece or Portugal but Germany – together with France – that undermined fiscal discipline by successfully averting sanctions foreseen under the Stability and Growth Pact. Now, the EU and in particular the big countries are openly advocating measures to amend and significantly strengthen the institutional mechanism in order to enforce fiscal discipline. 5 In this context, the member states of the EU are faced with a fundamental issue. The public debt crisis has shown that interdependence between member states of a monetary union is strong. 6 Going forward in reforming the institutional set up of the EU, the core question is to what degree EU member states are ready to further relinquish sovereignty. How centralised or federal should the EU be? This discussion bears remarkable resemblance to the early years of the United States. At the time, an intense debate took place around the full assumption of the Revolutionary War debt of the states by the national government. The debate pitted the Treasury Secretary Alexander Hamilton against James Madison and Thomas Jefferson.
Philipp M Hildebrand: Europe’s fiscal challenges Speech by Mr Philipp M Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the Annual General Meeting of the Swiss-American Chamber of Commerce, Rüschlikon, Switzerland, 21 June 2010. *  *  *  I would like to thank Rita Kobel Rohr for her valuable support in drafting this speech. I also want to thank Matthias Lutz for helpful comments. I want to thank the Swiss American Chamber of Commerce for the kind invitation. It is a privilege to speak to you this evening at your Annual General Meeting. The last time I was with you – it is now nearly two years ago –, I paid homage to Albert Gallatin, the legendary Swiss-American Secretary of the Treasury of the United States at the beginning of the 19th century. On that occasion, I chose to honour Gallatin because I felt he incorporates fundamental values long shared by Swiss and Americans alike. As it turns out, recent developments in Europe and elsewhere demonstrate compellingly that one of the important lessons of Gallatin’s outstanding career remains particularly relevant today. He teaches us that public debt reduction requires unwavering political commitment to fiscal discipline. In my remarks this evening, I will attempt to put the fiscal challenges Europe is currently facing in a broader context. The handling of these challenges by Europe’s governments and its citizens will have implications for Switzerland, but also for the United States and ultimately for the world.