the private sector conceals the fact that monthly flows have now been positive for a number of months. at the same time, these aggregate developments continue to reflect mainly an ongoing strengthening in the annual growth of loans to households, while the annual growth of loans to non - financial corporations has remained negative. a lagged response of loans to non - financial corporations to economic activity is a normal feature of the business cycle. the latest data confirm that the reduction in the size of banks ’ overall balance sheets has not continued since the turn of the year. however, further adjustments cannot be ruled out and the challenge remains for banks to expand the availability of credit to the non - financial sector when demand picks up. to address this challenge, banks should turn to the market to strengthen further their capital bases and, where necessary, take full advantage of government support measures for recapitalisation. to sum up, the current key ecb interest rates remain appropriate. taking into account all the new information which has become available since our meeting on 6 may 2010, we continue to expect price developments to remain moderate over the policy - relevant medium - term horizon. global inflationary pressures may persist, while domestic price pressures are expected to remain low. the latest information has also confirmed that the economic recovery in the euro area continued in the first half of 2010, but quarterly growth rates are likely to be rather uneven. looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. a cross - check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2 % over the medium term. the firm anchoring of inflation expectations remains of the essence. accordingly, the governing council will continue to monitor all developments over the period ahead very closely. as regards fiscal policies, the governing council welcomes the recent decision by euro area countries to formally establish a european financial stability facility. this needs to be accompanied by decisive action at the level of governments. it is essential that all countries stick to their commitments to correct high budget deficits and government debt and reduce fiscal vulnerability. to this end, the concrete adjustment measures

needed to achieve the budgetary targets should be fully specified. all countries must ensure that confidence in the sustainability of public finances is guaranteed. the governing council welcomes the fact that a number of euro area governments with the highest deficits and strongly increasing debt levels have adopted additional fiscal consolidation measures and set out more ambitious fiscal targets. in this context, we took note of the spring 2010 orientations for fiscal policies in euro area countries agreed by the euro area finance ministers on 7 june, and welcome the commitment to take additional measures, where needed, in order to ensure the achievement of the budgetary targets for 2010 and beyond. it is indeed key that the new budgetary targets be achieved. the governing council fully agrees with the ministers on the priority of halting and reversing the increase in the debt ratio and welcomes the commitment to take immediate action to that effect. for all euro area countries, structural reforms leading to higher growth and employment are crucial to support a sustainable recovery. existing competitiveness problems, as well as domestic and external imbalances, need to be urgently addressed by the countries concerned. to that end, wage - bargaining should allow wages to adjust appropriately to the competitiveness and unemployment situation. likewise, measures that increase price flexibility and non - price competitiveness are essential. finally, an appropriate restructuring of the banking sector should play an important role. sound balance sheets, effective risk management and transparent, robust business models are key to strengthening banks ’ resilience to shocks and to ensuring adequate access to finance, thereby laying the foundations for sustainable growth, job creation and financial stability. we are now at your disposal for questions.