However, aside from monetary policy, it lacks powerful decision-making institutions. This means that rules-based frameworks must act a substitute for centralised authority. For fiscal and economic issues, a unitary state would have a finance ministry which both defines and vetoes fiscal and broader economic policies. EMU must achieve the same effect through its economic governance framework. We know from  BIS central bankers’ speeches  3  research, including some by Professor Rogoff, also corroborated by experience, that softrules will not achieve the desired outcome. Strengthening the rules governing fiscal and broader macroeconomic policies is thus essential. The Stability and Growth Pact (SGP), which was created to discipline fiscal policy, has not worked well and is now being strengthened and complemented by a macroeconomic imbalances procedure. Greater automaticity in the implementation of the SGP is needed when unsustainable policies put the stability of the euro area as a whole at risk. Credible economic governance needs to be consistent and predictable. It also needs to be backed by timely, tough sanctions to encourage compliance. Fiscal surveillance should set ambitious benchmarks for excessive deficit and for setting the adjustment path towards a country’s medium-term budgetary objective. The liquidity dry-ups and contagion risks also call for stronger backstop mechanisms, to provide significant, albeit temporary, liquidity assistance. Stronger financial supervision at euro area level is also essential. Finally, national authorities need to take ownership of their European commitments. This means anchoring EU rules in their national legislation and making them mandatory and being held to account by domestic parliaments.
Vítor Constâncio: Laudatio for Professor Kenneth Rogoff, recipient of the 2011 Deutsche Bank Prize in Financial Economics Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the Laudatio for Professor Kenneth Rogoff, recipient of the 2011 Deutsche Bank Prize in Financial Economics, Frankfurt am Main, 22 September 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure to address a few words to mark the awarding of the 2011 Deutsche Bank Prize in Financial Economics to Professor Kenneth Rogoff of Harvard University. I will recall some of Professor Rogoff’s outstanding contributions to economics and financial economics, and I will also comment on some of his research in the context of the responses to the current crisis. Let me first emphasise that research plays a crucial role for the Eurosystem – just as it does for other central banks. Indeed, research has provided an essential input to the definition of the ECB’s price-stability monetary policy strategy. I would thus like to express my appreciation to Professor Rogoff for the influential contributions he has made in many fields of special relevance to central bank policymakers, ranging from monetary policy to international finance and financial crises. He merits particular praise for helping us to improve our understanding of some of the main causes and mechanisms behind the links between financial crises and sovereign debt crises.