banks on reasonable terms. • purchases of assets held by the private sector started and large - scale purchases of sovereign bonds were started in march this year. • it is no secret that i am no supporter of the plan to purchase government bonds. although the first small signs of success are apparent, we must still remain vigilant about the accompanying risks. above all there is the moral hazard that would emerge were some government to lose its appetite for reform. the falls in interest rates provoked by the massive purchases of bonds will lower interest rates temporarily on government borrowing and this must not be used as an argument for pushing vital but painful reforms to some point far off in the future. interest rates are only favourable for a short time and will support governments while they are making bis central bankers ’ speeches changes. if governments were to ignore the budget rules agreed in europe and were to start to increase their debts further, the measures taken by central banks would be of very little help. the other main task occupying central banks alongside monetary policy last year was the launch of single banking supervision. starting supervision and carrying out a thorough and comprehensive assessment of the assets of european banks needed a lot of work from central banks and financial supervision authorities. the successful conclusion of this work let us say with confidence that the biggest and most significant banks in a range of countries in europe are now assessed and supervised on the same terms. in estonia, swedbank and seb pank have come under single supervision. the estonian economy looking more closely at the estonian economy, it can be seen that the growth in estonia in 2014 came primarily from the domestic market. • domestic consumption was lifted by rising employment, falling unemployment, and strong wage growth and a simultaneous fall in prices. the economy grew faster in 2014 than in 2013, but it should be remembered that no return to the growth rates seen in the boom years of the last decade is to be expected. • it may be hard to get used to the idea of lower growth rates, but economic truths cannot be denied. the estonian economy and estonian demographics are in a different phase of development now, and long - term sustainable growth is notably lower at 3 – 4 %. consumer price inflation in estonia fell below zero in june 2014 for the first time since the crisis. four years ago prices fell across a wide range of goods and services, but last year the fall in prices was mainly caused by cheaper energy and food. eesti pank is not forecasting any rise in prices this year, but rising

##cautionary step by the central bank to guard against possible risks in the future. • the second step was taken three months ago when requirements for housing loans were applied to the commercial banks by the central bank with the aim of pre - bis central bankers ’ speeches empting possible credit booms in the future. the requirements do not have any noticeable effect on the loan market as things stand, as the banks are in any case currently acting conservatively. both of these measures are precautionary steps taken against any significant future increase in the risks in the real estate market should competing banks start to take on excessive risk. the crisis management measures taken by the central banks of the euro area in recent years have been successful, but they have come at a price. both the balance sheets of the central banks and the associated risks have increased many times over in consequence. however, the ratio of eesti pank ’ s increased equity to the assets used for monetary policy remains one of the lowest of any of the central banks of the euro area. the comparison with the other central banks of the euro area is important, as the balance of risks to capital of the central banks of the euro area as a whole is considered when joint monetary policy decisions are made. this makes it very important that the supervisory board of eesti pank decided to transfer three quarters of the 17 million euros that the bank made in profit last year to strengthening the capital of eesti pank. one quarter of last year ’ s profit, or 4. 3 million euros went to the state budget, and since 1992 eesti pank has allocated a total of 133 million euros to the state budget. it may be asked what exactly the central bank ’ s reserves are for, given that the riigikogu bears the responsibility of last resort for capitalising eesti pank? history has shown that central banks fall into difficulties at times when there is a general economic or financial crisis. i want to make every effort to see that eesti pank has no need to come to the riigikogu asking for capital at a time of such crisis. it is to avoid precisely this that the central bank builds up reserves and i am glad that the eesti pank supervisory board shares this opinion. for the central bank to be financially independent, it needs to maintain and invest its assets. the current situation in the financial markets, where interest rates on sovereign bonds have fallen to very low levels, poses new challenges for the central bank