liquidity in the market. policy moves also seem to have been generally well anticipated in the bond markets. since the start of stage three of emu, official ecb interest rate changes appear to have had only a limited immediate impact on nominal bond yields as measured by the average yield on 10 - year government bonds issued in the euro area. furthermore, ecb rate changes do not appear to have induced any noticeable additional volatility in the break - even inflation rate on french index linked bonds. this would seem to suggest that the monetary policy actions of the ecb have not brought about any significant revisions among investors with respect to the objectives of the ecb. in this sense, the actions by the ecb appear to have been transparent to the markets. bond market volatility has also declined. implied volatility on 10 - year german bund futures fell markedly during the course of 2000 and has subsequently stabilised. in sum, i would argue that the evidence from the financial markets supports the idea that since the start of the stage 3, ecb policy has always been credible and has usually been predictable. by and large the communication strategy with the markets has worked surprisingly well for a new institution. nevertheless, it is occasionally necessary for central banks to surprise the markets. as i have already mentioned, some recent monetary policy decisions have attracted attention because it was felt that they were not well anticipated by the markets. most notably the decision to lower official interest rates on the 10th of may this year came as a surprise to financial markets. the decision to make a 25 - basis - point rate in interest rates was seen by the ecb as an adjustment of the level of interest rates to somewhat lower inflationary pressure over the medium term. as regards the first pillar of the monetary policy strategy, it was felt that monetary developments no longer posed a risk to price stability. as regards the second pillar, it was felt that upward risks to price stability over the medium term had diminished somewhat. the change in assessment of the risks to price stability under the first pillar provides an interesting illustration of the problems faced by a central bank in communicating policy through financial markets. however, the circumstances of this monetary policy decision were unusual because the change in assessment came after it became possible to quantify significant upward distortions in m3 money supply growth. for some time, there have been indications that the monetary growth figures are distorted upwards by non - euro area residents ’ purchases of negotiable paper included in m3. around the time

cuts the cost of our products, which would otherwise have to be adjusted separately for each national market. so when the talk is about a deeper eu, greater harmonisation and fewer barriers to trade, then inevitably that is at the expense of the member states ’ freedom to decide. but in areas where national or even regional institutions are better suited to establish the right rules, then the principle of subsidiarity should be applied to a greater extent. it ’ s not about integration as a value per se, but about integration that ’ s appropriate and necessary. i think there is the necessary consensus on this point. now that the euro area has wriggled its way out of the crisis, things are improving economically. things are getting better but the economic situation still varies a lot. germany, which has weathered the crisis well because of the low level of government debt and household debt, is in a very good position. but other countries were severely hit and still have some serious challenges. the good news is that the recovery is firming up in all the countries of the euro area and expanding into more and more sectors. consumer and business confidence is rising, despite all the political uncertainties. that ’ s encouraging. after all the years of crisis progress is being made and people have trust in it. is the upturn a result of the ecb ’ s low interest rate policy? in 2009 we had the biggest recession in the post - war era, with a sharp increase in unemployment. since that low more than four million new jobs have been created in the euro area. our monetary policy has supported the recovery as it has made financing conditions for banks and thus also for households and businesses easier. but let us take a step back and consider the economic slump. the sovereign debt crisis resulted from it and caused the countries to fall into a recession again in 2011 and 2012. the ecb ’ s monetary policy and its intervention played a decisive stabilising role. it averted a depression. if there had been no intervention, what would have happened? to give an example : if the ecb had not given the spanish banks liquidity assistance in 2012, when a lot of money was withdrawn, capital controls would have resulted and creditors from other euro area countries would have found it difficult to gain access to their assets. people have forgotten just how dangerous the situation was at that time. many are unaware that the ecb and governments too acted in a carefully considered, reasonable way and prevented a worse outcome. the