conditions of the private sector and expanding the monetary base, the pspp makes it cheaper for households and firms to borrow. this can encourage them to borrow and expand consumption and investment. by eroding economic slack, such boost to demand helps to bring inflation back to levels below, but close to 2 %. between end - august 2014, when markets had started to price in larger - scale ecb asset purchases, and february 2016, the gdp - weighted average of euro area 10 - year sovereign bond yields has fallen by about 70 basis points. over the same period, bank lending rates to euro area companies – a key indicator of financing conditions in a bank - centred economy such as the euro area – have decreased by a similar magnitude. a sizeable fraction of this easing in financing conditions can be attributed to our monetary policy measures in general and the pspp in particular. but here again, there are boundaries and limits. although it is intended to lower the bond yields of sovereigns as a major determinant for bank lending rates to companies, it is not only undesirable to wipe out the credit risk premium investors “ instrument independence ” has gained currency as a common expression in the economic literature on central bank independence and is understood as “ the central bank ’ s ability to freely adjust its policy tools in pursuit of the goals of monetary policy ”, see debelle, guy and stanley fischer ( 1994 ), “ how independent should a central bank be? ” in jeffrey c. fuhrer ( ed. ), “ goals, guidelines and constraints facing monetary policymakers. ”, federal reserve bank of boston, pp. 195 – 221. however, it is not a well - defined legal term. in the legal doctrine, one would rather refer to “ discretion ” regarding the choice of instruments. bis central bankers ’ speeches ask from sovereign issuers, it would moreover raise serious legal concerns as to whether this would not enter the remit of economic policy. • second, with key ecb interest rates already very low, and the cbpp3 and abspp having insufficient scope to address severe downside risks to price stability given their limited market size, purchases of investment - grade bonds of euro area sovereigns were considered a necessary instrument to provide additional monetary stimulus. in particular, there was no other asset class with comparable risk characteristics and with a similar potential for easing private - sector borrowing conditions. • third, pspp purchases expose the eurosystem balance sheet to a certain risk. these risks are

labour legislation to respond to the changes in demand without having to shed staff. if bis central bankers ’ speeches used appropriately, not only will this prevent the demise of certain companies, but production will also be much more competitive and spanish products more attractive, both domestically and abroad. evidently, in a situation like the present, the recovery in spain should be export - led. accordingly, all measures and reforms that enhance competitiveness should be considered a priority. in this connection, the state budget for 2012 is part of a broader, medium - term consolidation strategy that requires the participation of the different levels of government. the stability and growth programme unveiled in late april to the european authorities details these objectives up to 2015, with a breakdown of the efforts required by each level of government. from my standpoint, the fiscal consolidation process is one of the cornerstones of the recovery of the spanish economy, although the adjustments needed to meet the fiscal targets may in the short term exert adverse effects on demand and activity. as for the financial tensions that have shaken the spanish economy in recent weeks, holding resolutely on a course towards fiscal consolidation is a pre - requisite for dispelling the mistrust stifling the economy. therefore, the potential short - term costs will be amply offset once it becomes apparent that the efforts made are yielding results. the state and social security budgets for 2012 are pivotal to this strategy. fortunately, while they have not yet been approved, many of the measures they envisage have already been implemented, thereby preventing precious time from being lost in adjusting the fiscal imbalance. in this respect, it should be stressed that cutting the budget deficit requires an unprecedented structural effort. the measures that have to be adopted must reduce debt in an environment in which the interest burden will be growing and where the double - dip in economic activity will affect tax revenue and some cyclical expenditure. in light of these conditioning factors, the consolidation strategy must obviously use all the instruments available, on both the expenditure and revenue sides. as regards revenue, various measures have been adopted affecting, above all, the direct taxes households and firms pay. a reduced rate has also been introduced to bring undeclared assets out into the open. here, although the macroeconomic forecast for 2012 may be realistic, there are risks of slippage in projected revenue. this is in light of the composition activity is likely to evidence, given the sizeable weight of exports and the weakness of private consumption and the real estate