a longer horizon, we remain concerned about the sustainability of global economic growth being undermined by external imbalances in some parts of the world economy. concerning prices, the latest information is in line with earlier expectations. according to eurostat's flash estimate, annual hicp inflation was 2. 2 % in november, following a rate of 2. 0 % in october. similar rates have prevailed for most of this year and this inertia of inflation rates at around 2 % is likely to continue in the coming months. due to adverse food price developments, the evolution of oil prices and planned increases in indirect taxes and administered prices, inflation rates will fall neither as quickly nor as strongly as was expected earlier in the year. however, when assessing price trends over the medium term, a number of factors should dampen inflationary pressures. first, given the past appreciation of the euro, import prices should contribute to this effect. second, domestic cost pressures should remain moderate. in particular, wage growth should be contained in the context of a recovery which, for the time being, is expected to remain gradual. provided that wage moderation can be preserved, which is indispensable for fostering employment, a cyclical recovery in productivity tends to dampen growth in unit labour costs, which has thus far been relatively high when judged against the weakness of the economy. overall, these views are also reflected in recently released forecasts and seem to be in line with survey data and financial market expectations. accordingly, there is a rather broad consensus on the main scenario. at the same time, this outlook for price stability is conditional on quite a number of assumptions, such as those on global developments, oil prices, exchange rates, wage developments and fiscal measures. therefore, elements of risk to the outlook for price stability need to be kept in mind. in this respect, we noted that financial market indicators for inflation expectations have shown some upward momentum over recent months. while technical factors might also have played a role in the movement of these indicators, and other indicators have remained broadly unchanged, inflation expectations warrant close monitoring. turning to the monetary analysis, m3 growth has been very strong over the past two years, reflecting portfolio shifts, precautionary savings and the low level of interest rates. the low level of interest rates has also supported the growth of credit demand. in our assessment, the accumulation of excess liquidity is not of concern for price stability at the current juncture, given that, for the time being

monetary union and, by extension, for european integration. admittedly, the political agreement on the single resolution mechanism has some limitations, insofar as it does not entail per se the full lifting of national borders in respect of the management and resolution of banking crises. unquestionably, though, the agreement marks decisive progress towards cross - country uniformity in the treatment of different bank liabilities in the event of viability problems and, in turn, it minimises the vulnerability of national public finances to bank crises, by ensuring that investors, and not taxpayers, will bear the brunt of the costs of these crises. in doing so, it does in fact successfully defuse many of the factors that have destabilised the monetary union over the past four years. at the same time, the creation of a single resolution mechanism is a vital complement to the single supervisory mechanism. it resolves the problems of legitimacy and compatibility of incentives that would have been generated by the relinquishing of sovereignty over the bis central bankers ’ speeches surveillance of the banking sector and crisis - prevention without concurrently having a common mechanism for managing and covering the ensuing consequences. accordingly, the political agreements reached are added motivation for all those involved – the ecb, national supervisory authorities and banks themselves – in the intense preparations for the single supervisory mechanism. at the moment, a good deal of effort is being focused on the comprehensive exercise to assess the solvency of european banks which, as reflected in the community regulation creating the single supervisory mechanism, must be conducted before the mechanism commences operating next november. allow me now to turn to the design and implications of this analytical exercise. 2. the comprehensive assessment of european banks the comprehensive assessment being conducted by the ecb chiefly comprises two fundamental elements : the analysis of asset quality and the stress tests. the asset quality analysis involves evaluating, taking balance sheets as at 31 december 2013 as a reference, how rigorously financial statements reflect the value of banks ’ different assets. this requires reviewing aspects such as the accounting classification of assets, the principles used to recognise their impairment, the sufficiency of the provisions set aside, how collateral is considered and, in the case of assets recorded at fair value, the suitability of the methodology used to determine their value. having completed the selection of the asset portfolios for review, actual analysis has now begun in what is called phase 2 of the exercise, whose methodology was made public on 11 march. the process will not only require banks