In addition to these important changes in relative productivity outcomes and more general gains in reducing inflation, we have seen a large increase in the mobility of global capital and a wider dispersion in gaps between saving and investment in national economies. The increase in the size of the U.S. current account deficit and the emergence of substantial surpluses in emerging Asia, the major oil exporters and Japan, reflect changes in saving and investment behaviors, changes driven by very different forces in different countries. So far, of course, these imbalances have been financed with relative ease, and it is hard to find evidence in risk premia in financial markets of concern about the sustainability of these trends. One final point about the broader environment: These changes have taken place in the context of unusually low forward interest rates, a subject that has been the focus of considerable attention in U.S. markets in particular. Forward nominal interest rates in the United States at the five- to ten-year horizon have stayed at quite low levels over the past 18 months. Using the inflation expectations derived from the TIPS (Treasury Inflation-Protected Securities), along with measures of inflation risk premia, we can conclude with some confidence that a key factor holding down forward nominal rates is a significant reduction in expected future inflation and increased confidence in those expectations. Inflation and inflation risk are not the whole story though, as forward real rates in both the United States and many other countries have declined to unusually low levels.

And we won’t give in to fiscal dominance: nobody should expect us to delay a warranted monetary normalisation in order to accommodate the debt problems of any Member state. 2. Our structural acceleration: France is catching up  [Slide 8] Monetary policy plays its full role but cannot be the only game in town, as it may have only a limited impact on national economic adjustments within the euro area. Since the financial crisis, several European countries, including Spain, have successfully launched major reforms and reached higher and sustainable growth while preserving their social model. [Slide 9] However, efforts should be pursued to spur economic growth in the medium term. Structural unemployment remains high and potential growth remains significantly below its 1990s or 2000s average. Structural reforms are needed to unleash the full economic potential of European countries. The case of France, today, is particularly interesting in that regard. France faces important structural challenges but as already said, the economic environment for reform has never been more favourable since the financial crisis. So it is our imperative to “fix the roof”, now. And the good news is that reforms are on a firm upward path. I stress it as a fully independent Central Banker: the new government has indeed displayed a strong commitment to reforms and already implemented major structural reforms to boost employment, productivity and resilience. [Slide 10] The recent labour market reforms have widened the negotiation space given to social partners for decision-making and reduced the uncertainties of labour disputes.