third, we forcefully confronted financial fragmentation which has weakened the impact of monetary policy in the very parts of the euro area where it is most needed. fragmentation has created divergent borrowing conditions for firms and households with equal creditworthiness but different country codes. as our main tool to combat fragmentation, we adopted outright monetary transactions ( omts ). omts allow for targeted intervention in euro area sovereign debt markets – provided the country concerned commits itself to strict and effective conditionality under an eu / imf economic adjustment programme. a closer look at omts at almost one year from its announcement, the benefits of omt are visible to everybody : spreads in sovereign debt markets have fallen substantially. since the omt announcement, spreads on long - term bonds for spain, italy and ireland have fallen by around 250 to 300 basis points and for portugal by almost 600 basis points. spreads in corporate debt markets have fallen by about 150 to 200 basis points for important market segments, and made it easier for firms to raise funds in the market. this has been the case for highly rated large corporations as well as for other corporations. bis central bankers ’ speeches banks have been able to re - access the market, for both funding and for raising capital, and the strong divergence in funding costs across constituencies has receded somewhat. deposits have flown back : banks in stressed countries have seen the deposits by the euro area money - holding sector increasing by about 200 billion euros since august 2012. another sign of normalisation, and a very important one for german savers, pension funds and insurance companies, has been the increase in german government bond yields, previously suppressed by panic - driven safe - haven flows, which have edged up by around 25 basis points. and the best summary indicator for fragmentation and related payment flows in the euro area, the level of target balances, has shown a decline by 285 billion euros, or 25 %, since the peak last year. target balances now roughly stand at levels prevailing before the launch of the two 3 - year ltros in late - 2011. the establishment of omt has therefore been beneficial to everybody : sovereigns, corporations, banks as well as individuals, and it has benefitted both periphery and core countries. therefore, i would like to reflect in more detail on this measure. what is its purpose? omts are aimed at eliminating redenomination risk from the markets – the unwarranted anticipation of euro area breakup. redenomination risk undermined our ability to

##m will have to provide adequate backstop. mitigating macroeconomic risk the final determinant of banks ’ capacity and willingness to lend concerns their attitude towards risk. like any central bank, the ecb cannot control microeconomic risk – how banks assess whether a specific potential borrower will fail to repay a loan. but the ecb is actively contributing to a reduction in macroeconomic risk : by firmly stabilising inflation expectations, it provides a nominal anchor for the economy as a whole. this supports lending and borrowing decisions, and ensures that longer - term investment projects remain profitable. but it is the responsibility of national governments to eliminate uncertainty about growth and the sustainability of public finances. without unravelling the progress already achieved, it will be essential to focus consolidation on the fiscal composition of the budget, reducing those expenditures that make the least contribution to growth and reducing the tax burden on economic activity. to inspire confidence, policy - makers must follow - through with their fiscal reform agenda. in fact, little would be gained from a loosening of fiscal adjustment today if it creates market expectations that additional tightening will become necessary tomorrow. in the medium term, we need to ensure that the adjustment is based on increasing the productivity of our economies. only through steadfast pursuit of such structural reforms can the competitiveness of euro area economies in the global marketplace be restored. bis central bankers ’ speeches summary and outlook let me summarise. strengthening financial resilience requires ambitious policy efforts in various areas. lending to the real economy can only be expected to resume if accommodative monetary policy is accompanied by swift balance sheet repair and determined fiscal and structural reforms. within the euro area, recent progress suggests that decision - makers are ready to tackle the simultaneous tasks of reforming their domestic economies and completing the institutional architecture at the european level. the ecb will continue to support macroeconomic performance by ensuring price stability in the euro area. in calibrating our policy response to future challenges, the ecb will remain deeply committed to our monetary policy framework. that framework is characterised by pursuing unambiguously price stability, firmly preserving our central bank independence and tailoring our policy instruments to the specific challenges at hand, while maintaining fixed our price stability objective. as such, our framework is inspired by successful experiences of other central banks which have demonstrated the benefits for monetary policy to rely on a sound institutional anchor, and have earned trust and respect based on their clear commitment to price stability. the ecb has the same