eligible collateral. in addition, the ecb also engaged in buying government securities via its securities markets programme ( smp ). the governing council ’ s aim of this programme is to restore a proper transmission process that threatened to become impaired given dysfunctional market segments, as witnessed by very high interest rate spreads on sovereign bonds ( slide 9 ). this is a major difference with quantitative easing in other major countries where such bond purchases are conducted in financing governments and against the background of official interest rates being close to the lower zero bound. the aim of quantitative easing is to have a more accommodative monetary policy stance via lowering long - term interest rates. by contrast, the ecb ’ s purchases of bonds aim to ensure that our official short - term interest rates are transmitted in a proper way to the economy. another difference is that the ecb fully sterilises the liquidity injected in the market through its smp while this is not the case in the us and the uk. the ecb has much less government securities on its balance sheet than the central banks of the us and the uk ( slide 10 ). to be fair, this difference not only reflects the quantitative easing policy conducted in the uk and the us. in the us, for instance, government bonds already were an important item on the balance sheet of the federal reserve before the crisis. the federal reserve typically implements its monetary policy through purchases and sales of government bonds. let me also emphasise that all the non - standard monetary policy measures taken by the ecb are temporary in nature and complementary, rather than supplementary, to our interest rate instrument. at the same time, we should not forget the adverse side - effects of interest rates being kept at very low levels for a long time. in fact, the period preceding the start of the financial market tensions in august 2007 is reminiscent of the associated risks. notably, the very low level of global interest rates after 2001 and the resulting ample liquidity conditions at the global level has laid the basis for the current crisis. in addition, maintaining very low interests rates for a protracted period may weaken the financial incentive for deleveraging for both the banking and non - financial sectors, and can result in “ evergreening ” of outstanding loans. very low interest rates may also discourage banks from trading in interbank money markets. this is an important market for the transmission of monetary policy. related, it has adverse effects on some financial institutions such as money market funds. overall, the combination of

the main drivers behind the subsequent economic recovery ( slide 3 ). at present, it seems that some of the downside risks we had identified earlier have been materialising. looking ahead, short - term indicators and survey data suggest that real gdp growth may be very moderate towards the end of this year and at the beginning of next year. indeed, economic activity in the euro area is adversely affected by a moderation in the pace of global demand. in addition, the crisis continues to weigh on confidence and financing conditions in the euro area. these developments are expected to dampen activity. at the same time, activity should benefit from bis central bankers ’ speeches continued positive economic growth in the emerging market economies, the continued extremely low levels of short - term interest rates and the various measures that have been implemented to support the functioning of the financial sector. having said this, uncertainty remains very high and risks to the economic outlook on the downside. turning to prices, average inflation in the euro area rose to 1. 6 % in 2010, and continued increasing in 2011. it stood at 3 % in november, according the eurostat ’ s flash estimate, unchanged from previous months, still significantly lower than in the us. the main drivers behind the elevated inflation rates since the end of last year have been oil and other commodity price surges. as of late, increases in indirect taxes due to fiscal consolidation needs have been an additional driver. at the same time, domestic price pressures have remained moderate. survey data up to october point to some easing in pipeline pressures, especially at the earlier stages of the pricing chain, i. e. producer prices for intermediate goods. in view of the rather weak growth prospects and continued slack in labour markets, labour cost pressures are likely to remain contained in the medium term. looking ahead, euro area inflation rates are likely to decline in the coming months. they are expected to fall below 2 % in the course of 2012. in the medium term, inflation rates should remain moderate. this is in line with latest available inflation forecasts from public sources. medium to longer - term inflation expectations according to both survey and market based measures remain well anchored in line with the ecb ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. as to monetary and credit developments, following double digit growth rates in the build - up of the financial crisis, signalling risks for macroeconomic instabilities and price stability, annual growth in the broad monetary aggregate m3