The fortunes of businesses and households have diverged outside of the euro area, too, with corporate profits in many advanced economies surging over the past few quarters.
At the time when OMTs were announced in August 2012, financial fragmentation had created widely divergent borrowing costs for firms and households across euro area countries. As a result, the transmission of monetary policy was severely impaired. First, we saw impairments to the traditional inter-temporal arbitrage mechanism, which has curtailed the effectiveness of our standard monetary policy.