Economic activity in the third quarter is estimated to have increased by 0.4% compared with the previous quarter. In 2010 we expect to see a moderate recovery. This is in line with the latest Eurosystem staff projections, which were published last Thursday. However, this expectation remains surrounded by a high level of uncertainty. In the view of the Governing Council, the risks to the outlook remain broadly balanced. As regards price developments, inflation and inflationary pressures have remained low over recent months. In line with our expectations, inflation rates turned positive again in November, reaching an estimated 0.6%. Looking ahead, we expect inflation to remain moderate over the policy-relevant horizon, in line with a relatively slow recovery in demand. Indicators of inflation expectations over the medium to longer term remain firmly anchored, in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. Our monetary analysis confirms the assessment of low inflationary pressures over the medium term. In particular, we see that money and credit expansion continues to decelerate. In the case of loans to households, the latest data provide further confirmation of a levellingoff at low rates of growth. The growth of loans to enterprises follows turning-points in the business cycle with some lag. The still subdued levels of production and trade, coupled with broader uncertainty regarding the business outlook, will dampen firms’ demand for bank financing also in the coming months, especially for short-term loans.
Our experience with regard to the effects arising from EU banking groups’ activity in response to EBA’s requirements has provided a useful lesson for the future. In meetings on the Vienna Initiative II, we have many a times iterated that macroprudential policies undertaken in the euro area must take into account the relevant impact on non-EU host countries where systemically important EU bank subsidiaries operate. The home-host cooperation framework must help achieve better policy harmonization in the future, or, at least, provide for an early exchange of information in order to allow host countries to prepare in response to potential shocks. Furthermore, the functioning of supervisory colleges should provide for an effective exchange of supervisory information, and barriers to successful participation by non-EU host countries must be eliminated through combined efforts. Your institutions’ position on each of these issues is extremely valuable to provide a comprehensive view of the implications of EU authorities’ policies and banking groups’ activity in our region, as well as to assess the implications of the banking reforms currently underway in the EU. More specifically, I think that it would be useful for us to discuss along the following lines: •  What mechanisms may we use to revive credit growth in our economies, and what contribution do you expect by EU authorities and EU banking groups in this regard? •  How can we practically establish a permanent mechanism for coordination with the ECB, in the framework of the Banking Union?