The Rafael del Pino Foundation hosted the Keynote Lecture by Juergen B. Donges entitled "How to ensure the viability of the euro area" on 19 May 2011. Donges entitled "How to ensure the viability of the euro area" on 19 May 2011.
Juergen B. Donges stated: "What determines the strength (or weakness) of a currency is, in the medium term, the domestic inflation rate compared to that of other countries. In this respect, the ECB has shown a greater determination for stability than the Federal Reserve, even when it had to implement, in recent years, anti-crisis monetary policies (conventional and unconventional) that necessarily injected excessive liquidity into the system. This is very important. If the ECB were to be lax on inflation, then the euro would be at risk. The same would be true if governments were to make a habit of pressuring the ECB to buy government bonds, including those of dubious quality, as happened in the Greek bailout programme of May 2010".
Regarding the possibility of bankruptcy of a member state of the Monetary Union, Juergen B. Donges argued that "there has to be a mechanism for the resolution of state bankruptcy, if it is a 'last resort'. Donges argued that "there has to be a mechanism for the resolution of state bankruptcies, if this is the 'last resort'. What our political leaders so pathetically declare - 'we will not let any partner fail' - may turn out to be a chimera. In the case of Greece, rumours are intensifying that a sovereign debt restructuring will have to take place. This has long been predicted by many analysts, as it was easy to calculate that, even with a fiscal austerity plan, Greece's already high debt-to-GDP ratio would continue to rise; we now believe it will rise to 160% by 2013. A country like Greece, with manifestly weak economic growth, cannot withstand such a thing. The drastic adjustment requirements have a contractionary effect on the economy, without there being, in the short term, a valve to carry out the adjustment also through output growth (as would be the case if the currency could be devalued). But to say this was politically incorrect. Sooner or later the markets, ruthless as they are, remind politicians what reality is".