acknowledges, is that these recommendations are too rarely followed. it would be preferable if countries took them seriously and felt collectively committed. in the case of spain, my personal view is that much remains to be done to support the young people and help find jobs. they are the future. q : would you be in favour of the binding agreements proposed by angela merkel? a : binding agreements are one way of achieving this. however, in my view, it is better to stay within the community framework. it should be a multilateral discussion and not a bilateral one between the commission and each member state. there should be shared sovereignty as far as structural reforms are concerned, because there is a common interest. q : the stress tests are nearing completion. can we expect many failures and are there likely to be any surprises? a : we are checking the results, which will be available in the second half of october, so i cannot make any comments on them at present. q : will the tests be credible after what happened with portugal ’ s banco espirito santo ( bes )? it collapsed despite the fact that the ecb and the rest of the troika had been supervising lisbon for the past three years. a : in the bes case, it appears that information was being kept from the supervisor, which was the banco de portugal and not the ecb. the ecb, the european commission and the imf were in lisbon to analyse financial stability and macroeconomic outcomes. the ecb had neither the instruments nor the mandate to supervise banks, as this was the role of the national supervisor. i do accept, however, that the bes case has served as a reminder that there are risks beneath the surface in the european banking sector, and i am convinced that bis central bankers ’ speeches the single supervisory mechanism will be able to examine the financial health of the institutions in depth. q : could something similar to the bes case happen in other countries? a : this is always a possibility. risks are inherent in banking activities. the only solution is a robust management framework within each bank and on a european level, coupled with instruments such as the single supervisory mechanism or the single resolution mechanism, which will be available in case of crisis. q : some analysts are comparing the situation in the euro area to that in japan. a : i would imagine that they are referring to the situation in japan in the 1990s, rather than to present - day japan. at that time, japan

profits increase by more than expected. upside risks to inflation also stem from the heightened geopolitical tensions, which could push energy prices and freight costs higher in the near term and disrupt global trade. moreover, extreme weather events, and the unfolding climate crisis more broadly, could drive up food prices by more than expected. by contrast, inflation may surprise on the downside if low confidence and concerns about geopolitical events prevent consumption and investment from recovering as fast as expected, if monetary policy dampens demand more than expected, or if the economic environment in the rest of the world worsens unexpectedly. greater friction in global trade would make the euro area inflation outlook more uncertain. financial and monetary conditions market interest rates in the euro area have declined further since our october meeting, reflecting the perceived worsening of the economic outlook. although financing conditions remain restrictive, our interest rate cuts are gradually making it less expensive for firms and households to borrow. the average interest rate on new loans to firms was 4. 7 per cent in october, more than half a percentage point below its peak a year earlier. the cost of issuing market - based debt has fallen by more than a percentage point since its peak. the average rate on new mortgages, at 3. 6 per cent in october, is about half a percentage point lower than at its highest point in 2023, even though the average rate on the outstanding stock of mortgages is still set to rise. 3 / 4 bis - central bankers'speeches bank lending to firms has gradually picked up from low levels, and increased by 1. 2 per cent in october compared with a year earlier. debt securities issued by firms were up 3. 1 % in annual terms, which was similar to the increase in the previous few months. mortgage lending continued to rise gradually in october, with an annual growth rate of 0. 8 per cent. in line with our monetary policy strategy, the governing council thoroughly assessed the links between monetary policy and financial stability. euro area banks remain resilient and there are few signs of financial market stress. financial stability risks nonetheless remain elevated. macroprudential policy remains the first line of defence against the build - up of financial vulnerabilities, enhancing resilience and preserving macroprudential space. conclusion the governing council today decided to lower the three key ecb interest rates by 25 basis points. in particular, the decision to lower the deposit facility rate – the rate through which we steer the monetary policy stance – is based