- essentially the same pace as in march 2003, and the core pce price index change from twelve months earlier moved back above the 1 percent level in both february and march. although the increased pace of economic activity has put some upward pressure on prices at earlier stages of processing and higher energy prices are being passed through to the prices of some products, strong productivity growth and slack in resource utilization have kept core retail price increases in check. household financial conditions some commentators have expressed concern about the rapid growth in household debt in recent years, fearing that households have become overextended and will need to rein in their spending to keep their debt burdens under control. my view, however, is considerably more sanguine. although there are pockets of financial stress among households, the sector as a whole appears to be in good shape. as bankers, you are well aware that households have taken on quite a bit of debt over the past several years. according to the latest available data, total household debt grew at an annual rate of 10 percent between the end of 1999 and the fourth quarter of 2003 ; in comparison, after - tax household income increased at a rate of 5 percent. but looking below the aggregate data, we must understand that the rapid growth in household debt reflects largely a surge in mortgage borrowing, which has been fueled by historically low mortgage interest rates and strong growth in house prices. indeed, many homeowners have taken advantage of low interest rates to refinance their mortgages, some having done so several times over the past couple of years. survey data suggest that homeowners took out cash in more than one - half of these “ refis, ” often to pay down loans with higher interest rates. on net, the resulting drop in the average interest rate on household borrowings, combined with the lengthening maturity of their total debt, has tempered the monthly payment obligations from the growing stock of homeowners'outstanding debt. the federal reserve publishes two series that quantify the burden of household obligations. the first series, the debt service ratio, measures the required payments on mortgage and consumer debt as a share of after - tax personal income. the second series, the financial obligations ratio, is a broader version of the debt service ratio that includes required household payments on rent, auto leases, homeowners'insurance, and property taxes. both ratios rose during the 1990s, and both reached a peak in late 2001. since then, however, they have receded slightly on net from their

recently. competition is of the essence. in many sectors, rents are appropriated by special interest groups and should be returned to the people of europe. finally, investment in research, human capital and infrastructure is key to ensuring that the negative impact of austerity remains limited in time and does not weigh down on the long - term growth potential. new ways of pooling resources and financing the common provision of public goods should be found. i conclude on a positive note. overall, the euro area has a high private saving rate and sound fiscal fundamentals, with deficit and debt ratios that are much lower than in the us, the uk or japan. its workforce is industrious and highly skilled ; its firms are innovative and do not fear global competition. if the euro area unites and overcomes the present crisis of confidence, it will emerge as a strong economy for the rest of the 21st century. i thank you for your attention. bis central bankers ’ speeches