germany and beyond, i see very healthy wage growth of some of those deals as well. when's that going to start feeding through into broader inflation, the kind of figures you want to see to be able to feel more comfortable about raising rates to a normalised level? we've seen some uptick in inflation even in the most recent numbers. it is slow, because we are starting from a point where unemployment at eurozone level was high and broad. we know that it takes time for it to translate into wage pressures. we have to be patient, but there is no reason to think that this will not translate into higher price and wage pressures. we've started to see it. in terms of the cover you've given countries like italy and others as well, do you feel they've squandered that cover that the ecb has given and the support the ecb has given them through a lower yield and lower borrowing cost? we still seem to be going through the same arguments, the same structural issues. in fact if anything a potential new government in italy could scrap some of the reforms that the ecb so applauded. certainly the advice we are giving to governments, insofar we can give advice to governments, because they are independent from us as much as we are independent from them. the only advice we can give is to use that environment of strong growth, of lower rates to build the buffers in the economy. that includes building fiscal buffers but that also includes doing structural reforms so that the economy can become stronger. listening to some of the more recent speeches from mr draghi and hearing comments from yourself and others, i don't get the impression that the ecb feels that their opportunity has been taken. am i wrong? there has been some disappointment on the fiscal side where we believe that governments generally could have made better use of the windfall of lower rates to reduce their deficits, to consolidate their finances in a more permanent way, in a more structural way. that's true. now, when it comes to reforms in the real economy we've seen a lot going on. look at how much spain has reformed its labour market. that's now yielding very positive results in terms of job creation. look at what france is doing, which really goes in the right direction, so reforms are being done. are they being done in italy? i cannot really comment on italy at that current stage where we are in

/ press / bcreg / 20111122a. htm. bis central bankers ’ speeches a stress test is a critical part of the annual capital review. but, as these different purposes indicate, the capital review is about more than using a stress test to determine whether a firm ’ s capital distribution plans are consistent with remaining a viable financial intermediary even in an adverse scenario. as indicated during our capital reviews in both 2011 and 2012, the federal reserve may object to a capital plan because of significant deficiencies in the capital planning process, as well as because one or more relevant capital ratios would fall below required levels under the assumptions of stress and planned capital distributions. likewise, the stress test is relevant not only for its role in the capital planning process. as noted earlier, it also serves other important purposes, not least of which is increased transparency of both bank holding company balance sheets and the supervisory process of the federal reserve. results of the 2012 stress test and capital review the stress test that the federal reserve developed in the fall of 2011 and administered over the succeeding months was based on a quite adverse scenario. it hypothesized a deep recession in the united states, with gdp contracting sharply, unemployment reaching a peak of more than 13 percent, equity prices falling by half, and house prices declining by an additional 20 percent from their 2011 levels. in addition, given the potential for financial stress in europe, the scenario included a global recession and a global financial market shock. the latter, applied to the trading, derivatives, and private equity positions of the six firms with the highest volumes of trading, included a dramatic widening of credit default spreads for both european sovereigns and financial institutions, as well as sharp increases in spreads for european sovereign bonds. when we announced the scenario in november, a number of observers questioned whether a scenario of this severity was realistic. in this regard, it is important to reemphasize that the stress scenario is not a forecast of what will happen. it reflects, instead, an unlikely but not implausible outcome in which the u. s. economy experiences a serious recession simultaneously with a significant contraction of global economic activity and a global financial shock. thus, the assumed increase in unemployment is similar to that experienced in the three deep post - world war ii recessions. it is because current unemployment stands so much higher today than it did at the outset of those recessions that it is assumed to rise to a postwar high. more fundamentally, the severity of