resilience remains crucial. existing releasable macroprudential capital buffer requirements and adequate borrower - based measures should be maintained to ensure that banks can absorb any future shocks. at the same time, the policy framework for non - banks should be improved from a macroprudential perspective to strengthen the sector's resilience. finally, to mitigate the current risks to sovereign debt sustainability, it is important to implement the eu's revised economic governance framework fully, transparently and without delay. given the structural challenges related to low potential growth, the consolidation of public finances will need to be designed in a growth - friendly way. 3 conclusion let me conclude. in december we decided to further moderate the degree of monetary policy restriction, lowering the key ecb interest rates by 25 basis points. this decision was based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. we are also continuing the process of balance sheet normalisation. in december the last repayment of the targeted longer - term refinancing operations was completed and reinvestments were discontinued. we are determined to ensure that inflation stabilises sustainably at our 2 % mediumterm target. given the high level of uncertainty, we will continue to follow a datadependent and meeting - by - meeting approach to determining the appropriate monetary policy stance. the high level of uncertainty calls for prudence. in particular, severe global trade frictions could increase the fragmentation of the world economy, uncertainty about fiscal policy and its present challenges could weigh on borrowing 3 / 4 bis - central bankers'speeches costs, and renewed geopolitical tensions could affect energy prices. we are therefore not pre - committing to a particular rate path. if the incoming data confirm our baseline, the policy trajectory is clear, and we expect to continue to further reduce the restrictiveness of monetary policy. 1 i am grateful to adriana grasso, max lampe and thomas mcgregor for their contributions to this speech. 2 baumann, a., l. caprari, g. kocharkov and o. kouvavas, ( 2025 ), " are real incomes increasing or not? pessimism and its impact on consumption ", forthcoming in economic bulletin, issue 1, ecb. 3 see draghi, m. ( 2024 ), the future of european competitiveness, september, and letta, e. ( 2024 ), "

. monetary authorities also play an important role in this process by conducting a credible policy which leads to price stability and thus creating an environment where entering into erm ii will be smooth and credible. most of the results presented here are broadly in line with the ecb ’ s view that eu enlargement has positive implications for economic growth and welfare in both the “ previous ” and “ new ” member states ; unfortunately, these benefits have often been set aside in the public debate. already the prospect of the countries joining the eu had positive implications. as trade and capital movements have been to a large extent liberalised well before accession, the degree of integration had already reached a significant level between the new and previous member states. in fact, at the eve of eu enlargement the euro area directed around 11 % of its total exports and imports to the new member states, an increase of almost 50 % in 10 years ; the 10 new member states as a group represent one of the main trading partners of the euro area, exceeding trade with japan by far ( 8 % ) and being only somewhat lower than the european trade with the united states ( 14 % ). similarly, the share of the eu - 15 total foreign direct investments that was orientated towards the new member states was also around 12 % and tripled since 1999. while these figures are still low compared to the fdi flows directed to the us, they are considerably higher compared to those flowing to japan. in addition, the prospect of eu enlargement has significantly sheltered the new member states from adverse spill - over effects coming from other emerging markets. with eu enlargement now in place, economic and financial integration will advance further. with the extension of the single market to the new member states all remaining barriers to trade and capital flows have been removed by now, thereby supporting further integration. it is already observable that small and medium - sized enterprises from the eu - 15 countries are becoming significantly more active in the new member states, as the economic and legal environment has become more stable upon accession. let me stress that enlargement has also led to higher competition in the eu and enhanced the scope for economies of scale following the increase in the market size. by this, productivity will rise, thereby contributing to an increase in the potential growth rate of the eu. it is important to note that also the “ previous ” 15 member states will be affected by higher competition in the eu, which could accelerate structural reforms in these countries. in fact