4 bis central bankers'speeches play, europe is better equipped to respond to this unprecedented crisis. the agreement includes a generic reference to a future recovery fund that is yet to be defined. what criteria do you think it should meet? the ecb has always stressed the need for our economic and monetary union to be completed in order for the euro area to become more resilient. on the one hand, we need a european deposit insurance scheme so that savings have the same protections in every country. we ’ ve also called for progress in capital markets so that euro area firms have access to more sources of funding. and in the fiscal sphere, we need a shared budgetary instrument that completes the monetary union. the fund that has been proposed could go in that direction, but its size and how it is funded remain open to discussion and will depend on future decisions by governments. in any case, the determination to present a shared response is very significant, because it is a strong political signal, and also a strong signal to the markets. spain started the debate when it too voiced its opposition to the use of the esm. minister calvino has now stated that spain should not resort to using it and that, in any case, she only believes it is an option if conditionality is extremely low … before this crisis, spain was growing, it was competitive, its debt - to - gdp ratio was below 100 %, its government deficit was 2. 6 % and its unemployment rate stood at 14 %. currently it has been able to obtain the funding it requires on the markets, it is not experiencing any difficulties, and the spread against the german bund is 110 basis points. let ’ s hope that spain can maintain this relatively comfortable position. italy is not in the same position ; could that be why it is adopting a more combative stance? i don ’ t want to start making those kinds of comparisons. let ’ s come back to spain then. there is talk of making a political pact, like the moncloa pacts of 1977. what ’ s your opinion? are you in favour of pacts? i think we must always be in favour of political pacts during extraordinary times such as these. although a comparison with the 1977 moncloa pacts is perhaps not possible. at that time, spain was not a member of the eu and the euro did not exist. the main goal was to reduce inflation and change the income policy. today, there is a deep recession that will

yves mersch : the european central bank's monetary policy stance speech by mr yves mersch, member of the executive board of the european central bank, at an mni connect event, singapore, 25 july 2017. * * * the global recovery is firming and broadening. and the ongoing economic expansion in the euro area provides confidence. but while inflation will gradually head to levels in line with our definition of price stability in the midterm, it has yet to translate into stronger inflation dynamics. headline inflation is dampened by the weakness in energy prices. moreover, measures of underlying inflation remain overall at subdued levels. therefore, as i pointed out yesterday in my oral presentation at the bank negara malaysia monetary policy conference, a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term. let me provide you with some details of the ongoing recovery. euro area real gdp increased by 0. 6 %, quarter on quarter, in the first quarter of 2017, after 0. 5 % in the last quarter of 2016. incoming data, notably survey results, continue to point to solid, broad - based growth in the period ahead. the pass - through of our monetary policy measures is supporting domestic demand and has facilitated the deleveraging process. the recovery in investment continues to benefit from very favourable financing conditions and improvements in corporate profitability. private consumption is supported by employment gains, which are also benefiting from past labour market reforms, and by increasing household wealth. moreover, the global recovery should increasingly lend support to trade and euro area exports. however, economic growth prospects continue to be dampened by a slow pace of implementation of structural reforms, particularly in product markets, and by remaining balance sheet adjustment needs in a number of sectors, notwithstanding ongoing improvements. the risks surrounding the euro area growth outlook might be upward in the short term, but are overall broadly balanced. on the one hand, the current positive cyclical momentum increases the chances of a stronger than expected economic upswing. on the other hand, downside risks primarily relating to global factors continue to exist. the thread of deflation is gone and reflationary forces are at play. prices pressures in the early stages of the pricing chain remain strong but have still not transmitted to the later stages. euro area annual hicp inflation was 1. 3 % in june, down slightly from 1. 4 % in may, mainly due to lower energy price inflation. looking ahead