If such a situation lasts too long, it can cause inflation expectations to become dangerously detached from the monetary policy. The risk of long-term inflation expectations no longer being anchored to price stability must be resolutely countered. This risk is limited for the time being, but there are signs that should not be underestimated.
A thorough balance sheet cleansing can free banks of legacy problems and enhance the functional viability and stability of the European banking sector. What is important is that, at the national level, provisions should be made to cover potential capital needs.