Their model has positive features: (slide 10) equity capital amounts to 121% of GDP in the United States, compared with only 52% in the euro area, which means that in the United States innovation finds appropriate financing more easily. But it also has limitations that we should be mindful of: excessive cost of equity can have harmful effects. To meet the financial challenge, savings have a central role to play. I will focus on two avenues for steering them into productive investment. First, savings should be reoriented towards the long-term, more easily than towards direct risk-taking. French and, more generally, European savers are more risk-averse than American ones – and this is probably not going to change. The first savings motive in the euro area is indeed insurance against unexpected events (mentioned by more than 50% of households).viii But at the same time, savers are more and more concerned by the increase in life  5 expectancies and the need to prepare for retirement: old age provision ranks as the second most important savings motive (nearly 40%).ix Therefore it makes sense to offer savers new, complementary forms of savings products, that are less liquid during the first years, but that include some form of longterm capital guarantee. These new products would provide financial intermediaries – in particular life insurers – with liabilities long enough to take pooled risks – in the form of equity investments essentially – and savers with the higher returns offered by equity over the long run.
On the basis of the current level of oil prices and oil price futures, annual inflation rates  BIS Review 23/2007  1  are likely to fall during the spring and summer before rising again towards the end of the year and then most likely hovering again at around 2%. The new ECB staff macroeconomic projections foresee annual HICP inflation averaging between 1.5% and 2.1% in 2007 and between 1.4% and 2.6% in 2008. Compared with the December 2006 Eurosystem staff projections, the upper bound of the range projected for inflation in 2007 is somewhat lower, largely reflecting the fall in oil prices. By contrast, the projected range for inflation in 2008 is slightly higher, largely on account of the anticipated stronger economic growth, which could exert more intense pressure on factor utilisation and factor costs. In this context, let me remind you of the conditional nature of these projections, which are based on a series of technical assumptions, including market expectations for future short and long-term interest rates as well as for oil and nonenergy commodity prices. At the policy-relevant medium-term horizon, the outlook for price developments remains, in the Governing Council’s view, subject to upside risks. These relate to the possibility of renewed oil price increases and additional increases in administered prices and indirect taxes beyond those announced and decided thus far.