Naturally, we may well ask what happens under this scenario to those economies that have witnessed a loss in competitiveness compared with those countries that have implemented reforms, for example those affecting the labour market and those which have provided, along with other factors, for the so-called internal devaluation. In this case, the relative loss of competitiveness has been offset by the monetary policy stimulus and its impact on national demand and on the external sector. The depreciation of the euro accompanying this policy which has, no doubt, partly been one of its consequences, has improved the competitiveness of the area as a whole, stimulating exports and overall activity. Here we should recall that the euro area as a whole runs a most significant surplus on its transactions with non-euro countries. Both excessive deficits and large surpluses entail risks and costs. Accordingly, we believe there is justification behind the calls from several international institutions for those euro area countries that have the leeway to do so to implement policies conducive to the expansion of their domestic demand. I shall sum up with two ideas. First, that the de-anchoring of medium-term inflation expectations entails serious risks to financial stability and growth, risks that may be exacerbated in countries that have to follow a process of macroeconomic adjustment and deleveraging. Second, that monetary policy and structural reforms, when simultaneously applied, may lead to highly positive synergies. And now a few words to make way for the address by my much-respected and dear friend Vitor Constancio.

ECB policy interest rates were already then at their lower bound, at practically zero, with negative rates on the deposit facility. At the same time, liquidity provision by the ECB through its regular open market operations and its longer-term operations followed an on-demand principle, granting all the liquidity requested by banks; indeed, for several years a policy has been pursued under which, at the interest-rate marked for monetary policy operations, the ECB has not rationed the volume of liquidity provided to banks. After a few months’ experience, we can state that asset purchases have clearly contributed to re-anchoring inflation expectations, in line with the medium-term objective and, most importantly, they have checked and reversed the rise in real interest rates. Their effects have also been manifest in portfolio re-balancing, encouraging investors to shift holdings from riskBIS central bankers’ speeches  1  free or very low-risk securities to riskier ones, thereby reducing the cost of financing for consumers and investors. The second aspect I would like to mention is the role of economic policies in countries that have had to set about correcting the deep-seated imbalances built up in the expansion that ended with the onset of the crisis in 2007–2008. I would refer to policies aimed at improving competitiveness in goods markets and at reducing labour market inefficiencies, which are most significant in countries with high unemployment, in particular in those cases in which high indebtness is a constraint on the possibility of implementing demand-boosting policies.