impetus, with germany and italy contracting by 0. 2 % and france ’ s economy stagnating. although the decline of german gdp in the second quarter must be seen in the context of the strong increase in the first quarter due to the mild winter weather, indicators for the euro area suggest that growth will pick up only at a moderate pace. this is confirmed by the latest data, notably in germany, which have been rather disappointing. in sync with the subdued pace of the recovery, inflation in the euro area has been low as well. still, the risk of becoming enmeshed in a deflationary scenario is considered to be low – i think in this respect we share a common view in the governing council. rather than fearing bis central bankers ’ speeches broad - based deflation, the governing council is more concerned about a too prolonged period of low inflation. but so far, the low inflationary pressure is for a large part due to the decline in energy prices and the adjustment processes in some euro - area countries – factors beyond the direct influence of the eurosystem ’ s monetary policy and to which the monetary policy should react – simply speaking – only in the case of second - round effects. monetary policy in the euro area, then, is facing difficult times – especially as it has reached the lower bound on interest rates. further accommodation can therefore happen only through unconventional measures. and unconventional measures are what the governing council decided on in its june and september meetings with the launch of targeted long - term refinancing operations and two asset purchase programmes, the details of which were presented two weeks ago. the asset purchase programmes have triggered a debate, as their justification insinuates a shift from programmes specifically aimed at credit easing towards a quantitative easing philosophy. one should bear in mind that even before these decisions were made, the monetary policy stance was already very accommodative. the governing council therefore has to judge whether additional stimulus is needed or would be effective, and what unintended sideeffects would come with the measures. the declared goal of expanding the balance sheet of the eurosystem poses challenges for another reason, too. purchases of asset backed securities ( abs ) are problematic when they imply a transfer of risks from banks to the balance sheet of the central bank. in the end, this could amount to a transfer of risks from banks to the taxpayer. and this would run counter to everything we have strived to achieve in banking regulation over the last years.

the higher the target for the expansion of the eurosystem ’ s balance sheet, the higher the risks of overpaying for the assets. the pricing mechanism that is currently being determined needs to pay special attention to these risks. in any case, monetary policy accommodation can only do so much, and the longer it stays ultra - expansive, the higher could be the corresponding risks to financial stability. what monetary accommodation definitely cannot do is tackle the root causes of low growth potential in the euro area – the structural barriers that hamper competition, innovation, and hence productivity. addressing these structural deficiencies would also go a long way towards improving the transmission of monetary policy impulses. 3. reforms for recovery in many member states, particularly in those worst hit by the crisis, substantial efforts have already been made towards that end. in order to unleash productivity, labour markets have become more flexible, and competition in goods and services has become more intense. and according to the world bank ’ s doing business report, the efforts are starting to pay off : portugal, italy and spain have climbed up the ranking ladder by 17, 13 and 10 positions respectively over the last four years. greece has moved up by 37 positions. but it is obvious that ample room remains for further improvements. while portugal, spain, italy and greece have moved up the ladder in the doing business report, they are still a considerable distance from the top, with portugal ranking 31st, spain 52nd, italy 65th and greece 72nd. bis central bankers ’ speeches accordingly, recent estimates1 by the european commission suggest a medium - term growth potential ( 2014 – 23 ) for the euro area of only 1 %. the potential gains from structural reforms therefore remain especially large. a study2 by economists from the oecd suggests that a comprehensive package of labour, product, tax and pension reforms could raise gdp per capita in the eu by about 11 % after ten years. for the us, the potential gdp increase of structural reforms is 5 %, less than half that of the eu. and by no means are gains to be reaped in the peripheral countries only. ranked 111th in the world bank doing business category “ ease of starting a business ”, for instance, germany has ample room for improvement here as well. and this also goes for other economic policy areas where some reforms have even been rolled back recently. by the same token, growth - enhancing reforms are not confined to the national level. a lot of the potential inherent in our