burkhard balz : deepening trust, reinforcing cooperation speech by mr burkhard balz, member of the executive board of the deutsche bundesbank, to mark the inauguration of the bundesbank ’ s new representative in rome, virtual event, 10 november 2021. * * * 1 introduction ladies and gentlemen, italy, and especially rome, have always been destinations that many germans have longed to visit. one of these germans was without doubt the famous writer johann wolfgang von goethe. from 1786 to 1788, he fulfilled a lifelong dream by travelling through italy. the report on his travels, which he titled “ italian journey ”, became a best seller and remains to this day the embodiment of many germans ’ yearning for italy. by the way, the “ italian journey ” can also be found in my personal library. several days ago marked the anniversary of a milestone event on this journey : 235 years ago, in late october 1786, goethe had been on his travels for almost two months when he laid eyes on rome for the first time. overwhelmed, he wrote in his diary “ now, at last, i have arrived in the first city of the world! ” nowadays, it is far quicker and easier to travel to rome. nevertheless, every time i visit i am delighted to be in this exceptional cosmopolitan city. our reason for being gathered together today is not to celebrate the anniversary of goethe ’ s italian journey. the occasion is just as gratifying, though : the inauguration of dr. elisabetta fiorentino as the bundesbank ’ s representative at the german embassy in rome. 2 cooperation in the eurosystem ladies and gentlemen, much has happened since goethe ’ s travels to italy. but what has not changed is the special relationship between germany and italy, the deep bond between the two countries. without this bond, european integration and our single currency, the euro, would not have become possible. the bundesbank also has a variety of connections with italy. we have especially close ties with our colleagues at the banca d ’ italia. we work together harmoniously in many areas and in many working groups of the eurosystem. one example that goes beyond the usual level of cooperation concerns payment systems. the bundesbank and the banca d ’ italia, alongside the banque de france, manage target2, europe ’ s most important payment system. together with the banco de espana, the three central banks also operate the target2 securities ( t

we may mention the various measures approved in recent years, including most notably the start - up of the banking union. yet a series of more transitory – though persistent – factors has also contributed decisively to the momentum of the recovery. these factors include the role played by the ecb ’ s monetary policy and the implementation of an expansionary fiscal policy in recent years, combined with the significant reduction in oil prices from mid - 2014 to early 2016 and, subsequently, the improvements in external markets. 6 / 14 in respect of monetary policy, the various ecb measures have allowed financial conditions to be eased considerably, and have acted as a mainstay for the economic recovery in the area, contributing to countering the deflationary trends looming over the region some years back. for the spanish economy, it is estimated that from 2014 to 2018 the ecb ’ s measures boosted real gdp by 2. 3 % and the cpi by 1. 4 % ( see chart 11 ). these effects are of a fairly similar magnitude to those estimated for the euro area as a whole ( 2. 3 % and 1. 7 %, respectively ). the fiscal policy stance shifted from expansionary in 2015 and 2016 to neutral in 2017, but it will once again be expansionary in 2018 once the various measures included in the state budget for this year materialise. over recent years, the reduction in the deficit has been due to the economy ’ s cyclical improvement and to the fall - off in interest expenditure, while the structural deficit has held at still - high levels, according to the european commission ’ s latest estimates. that said, the role of the foregoing factors should, in future, tend progressively to taper off. this has been the case already for oil prices, the course of which has reversed since mid2017, and, to a lesser extent, of external markets, following the recent slowdown. but it is particularly relevant for demand - side ( monetary and fiscal ) policies. specifically, it is to be expected that monetary policy will progressively play a less pivotal role. with the advance of the euro area economy ’ s position in the cycle, according to the ecb ’ s latest estimates, there will be a progressive pick - up in inflation levels to close to 2 % in the coming years. indeed, at its meeting on 14 june, the ecb ’ s council reached the conclusion that the progress to date towards a sustained adjustment of inflation has been substantial, which gave rise to a