At the same time, deposits from households and non-financial corporations also rose in October. Overall, more observations are needed to distinguish between shorter-term volatility and more lasting factors. Unlike in the case of monetary developments, there has been little change in credit growth. The annual growth rate of loans to the private sector (adjusted for loan sales and securitisation) remained at –0.4% in October, unchanged from September. But this development reflects further net redemptions in loans to non-financial corporations, which led to an annual rate of decline in these loans of –1.5%, down from –1.2% in September. The annual growth in MFI lending to households remained unchanged at 0.8% in October. To a large extent, subdued loan dynamics reflect the weak outlook for GDP, heightened risk aversion and the ongoing adjustment in the balance sheets of households and enterprises, all of which weigh on credit demand. Furthermore, in a number of euro area countries, capital constraints, risk perception and the segmentation of financial markets restrict credit supply. In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue strengthening the resilience of banks where needed. The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels. Decisive steps for establishing an integrated financial framework will help to accomplish this objective. A single supervisory mechanism (SSM) is one of the main building blocks.

those running bigger current-account deficits) and less flexible economic structures. Most of these countries had not sufficiently adapted their institutional frameworks and economic policies to the membership requirements of a monetary union, in which exchange rate devaluation is no longer available to bring about rapid adjustments in competitiveness, and in which the basic parameters of monetary policy have ceased to be set independently by the authorities of each Member State. Having entrusted themselves to the macroeconomic stability provided by monetary union membership and scarcely pressured by markets that remained indifferent, for some time, to the problems being incubated, some of these economies built up significant imbalances, failing to undertake the reforms needed to withstand the shocks that could seriously affect them. The institutional arrangements designed 20 years ago in Maastricht did not have the wherewithal to prevent and, where appropriate, correct this lack of adaptation of national policies to the requirements of a monetary union; and nor did they have the mechanisms to manage the far-reaching and protracted crisis we have experienced. These shortcomings have translated into losses in well-being for the public at large. The impact in terms of output and employment has been enormous. On the projections available, the euro area will not regain the level of GDP existing at the start of 2008 until 2015, at the earliest. And in terms of employment, the gap will take even longer to close. Despite recent positive indicators, the current situation continues to pose challenges of the highest order to both European and national economic authorities.