thus align adjustment processes across countries. in fact, recent research on the intra - euro area impact of structural reforms shows that the variance of the responses of national outputs to an interest rate tightening would be – at the peak and after the implementation of such reforms – roughly one - sixth of the level that it achieves in conditions of cross - country heterogeneity in terms of price and wage rigidity. 2 3. key features of past productivity growth when comparing the euro area ’ s economic performance with that of the us over the longer term, there is evidence of clear underperformance in output growth. since 1995, the annual growth rate for the euro area has averaged 2. 2 % per year compared with 3. 1 % in the us. one of the main reasons for the euro area ’ s disappointing performance is the low trend growth in labour productivity. between 1980 and 1995, hourly labour productivity in the euro area grew on average by 2. 3 %, and between 1995 and 2007, it grew by only 1. 3 %. in the us over the same periods, the figure went from 1. 2 % to 2. 1 %. 3 understanding developments in services is crucial to our understanding of developments in the economy as a whole. services account for 69 % of the euro area economy and 70 % of total employment. 4 private sector services represent roughly half of the economy, and government - related services make up the rest. and it ’ s the private sector services that mainly account for the gap in labour productivity growth between the euro area and the us. from 1995 to 2005 their hourly labour productivity in the euro area only grew by 1. 0 % compared with 2. 9 % in the us. of the private sector services, distribution services, including the these results are obtained using a multi - country dsge model of the euro area, which is calibrated to the three largest member states, namely france, germany and italy. structural reforms were simulated by reducing the degree of price and wage rigidity and sectoral mark - ups to the lowest level prevailing in the euro area. see altissimo, f., t. blattner and s. siviero ( 2008 ). “ a multi - country dsge model of the euro area : lessons for structural policies ”, forthcoming. figures at the sectoral level are from euklems database and are not fully comparable with figures for the whole economy mentioned earlier in the speech. eu klems database.

in june 2014, bank lending rates for euro area non - financial corporations have fallen by around 120 basis points and those for households by around 110 basis points. rates on very small loans, which can be taken as a proxy for loans to small and medium - sized enterprises ( smes ), have declined by around 200 basis points. the significant improvement in funding conditions for smes is especially encouraging as these companies provide two - thirds of total private sector employment in the euro area. heterogeneity of lending rates across countries has also fallen sharply. for example, the difference between the average lending rate for firms in countries which were severely affected by the crisis and that in other countries has narrowed by more than 100 basis points over this period. the passthrough of monetary policy has become more even. banks are also passing on the favourable funding conditions to their customers due to the second series of targeted longer - term refinancing operations ( tltro - ii ), which further supports these positive developments. 3 1 / 3 bis central bankers'speeches the sharp reduction in bank lending rates has been accompanied by easier access to funding, which continues to improve, according to the latest survey results. 4 furthermore, bank lending volumes have been gradually recovering since early 2014. according to the latest survey on the access to finance of enterprises, covering the period from april to september 2017, euro area smes have continued to see improvements in the availability of bank loans. market - based funding conditions, too, have improved significantly in response to the corporate sector purchase programme launched in june 2016. against the backdrop of this substantial easing of financing conditions, domestic demand has become the mainstay of growth in the euro area, making the recovery more resilient to developments overseas. meanwhile, real gdp growth is projected to remain above potential growth in the coming years. the acceleration in the cyclical momentum and the ongoing reduction of economic slack strengthen our confidence that inflation will converge towards our inflation aim of below, but close to, 2 %. but inflation continues to be lacklustre. after lingering at levels well below 1 % for three years, with occasional dips into negative territory, euro area headline inflation increased towards the end of 2016 and has fluctuated between 1. 3 % and 1. 5 % since may of last year. annual inflation stood at 1. 3 % in january, according to eurostat ’ s flash estimate. looking ahead, on the basis of current futures prices for oil, annual rates of