So all this discussion about potential growth, productivity going forward, all that is important to see where this slack in our economies is going, and to take, then, monetary policy decisions. Slack in the economy seems to be the buzzword also here in Sintra. Listening to the President’s speech, of course slack is super-important to determine whether we can look through a period of low inflation, so where do we stand here now? Can we look through it, or is it still worrisome, where we stand when it comes to inflation? Constâncio: It’s very difficult for any central bank to have a very firm view on the slack. All central banks struggle to interpret where exactly is the situation, and in central banks we use many variables to try to gauge what is this slack, this difference that is in the economy. What we can say now is that what we observe is that domestic factors of inflation, starting with wage costs and then also price decisions, are not responding the way we would expect in view of what are the more common estimates of this slack. So we have to ask ourselves – are these measures of the economy correct? Should we look to other variables?
We’re talking about the banking sector: the European banking sector is not as strong as it should be. Just over the weekend we have seen two Italian banks getting state aid, so it was hugely criticised. Why did they get that exception, that they’re allowed to have state aid? Constâncio: It is not an exception. Everything is foreseen in the laws. BRRD, the directive on resolution of banks, was not applied because the Single Resolution Mechanism decided that these two banks did not deserve to be resolved, which according to European law means rescuing some part of the banks, and that the banks should go into liquidation. But going into liquidation means that state aid rules apply, so any public money then requires two things. It requires that shareholders and subordinated debt-holders participate in the costs, which is the case in the two banks, because they go to the entity with the bad assets…  But not senior bond holders? Constâncio: No, but the point – if the solution, for instance, under BRRD, had been applying 2/3  BIS central bankers' speeches  precautionary recapitalisation in that case also senior bond holders would not have been bailed in. So it’s not much difference from a situation of precautionary recap, which is foreseen in the law. It’s not an exception. It’s not a special privilege.