maintained to restore sound fiscal positions, in line with the commitments under the stability and growth pact and the 2012 european semester recommendations. a rapid implementation of the fiscal compact will also play a major role in strengthening confidence in the soundness of public finances. at the same time, structural reforms are as essential as fiscal consolidation efforts and measures to improve the functioning of the financial sector. in the countries most strongly affected by the crisis, noticeable progress is being made in the correction of unit labour cost and current account developments. decisive product and labour bis central bankers ’ speeches market reforms will further improve the competitiveness of these countries and their capacity to adjust. finally, it is essential to push ahead with european institution - building. the ecb welcomes the commission proposal of 12 september 2012 for a single supervisory mechanism ( ssm ) involving the ecb, to be established through a council regulation on the basis of article 127 ( 6 ) of the treaty. the governing council considers an ssm to be one of the fundamental pillars of a financial union and one of the main building blocks towards a genuine economic and monetary union. we will formally issue a legal opinion in which we will, in particular, take into account the following principles : a clear and robust separation between supervisory decision - making and monetary policy ; appropriate accountability channels ; a decentralisation of tasks within the ssm ; an effective supervisory framework ensuring coherent oversight of the euro area banking system ; and full compatibility with the single market framework, including the role and prerogatives of the european banking authority. as the commission proposal sets out an ambitious transition schedule towards the ssm, the ecb has started preparatory work so as to be able to implement the provisions of the council regulation as soon as it enters into force. we are now at your disposal for questions. bis central bankers ’ speeches

longer - term refinancing operations ( ltros ) to be allotted on 27 july, 31 august and 28 september 2011 as fixed rate tender procedures with full allotment. the rates in these three - month operations will be fixed at the average rate of the mros over the life of the respective ltro. as stated on previous occasions, the provision of liquidity and the allotment modes for refinancing operations will be adjusted when appropriate, taking into account the fact that all the non - standard measures taken during the period of acute financial market tensions are, by construction, temporary in nature. let me now explain our assessment in greater detail, starting with the economic analysis. in the first quarter of 2011, the euro area recorded strong real gdp growth of 0. 8 % quarteron - quarter, following the 0. 3 % increase of the fourth quarter of 2010. recent statistical releases and survey - based indicators point towards a continued expansion of economic activity in the euro area in the second quarter of this year, albeit at a slower pace. this easing reflects the fact that the strong growth in the first quarter was partly due to special factors, which will cease to play a role in the second quarter. hence, it is appropriate to look through such short - term volatility and to emphasise the positive underlying momentum of economic activity in the euro area. looking ahead, euro area exports should be supported by the ongoing expansion in the world economy. at the same time, taking into account the bis central bankers ’ speeches favourable level of business confidence in the euro area, private sector domestic demand should contribute increasingly to economic growth, benefiting from the still accommodative monetary policy stance and the measures adopted to improve the functioning of the financial system. however, activity is expected to continue to be dampened somewhat by the process of balance sheet adjustment in various sectors. this assessment is also reflected in the june 2011 eurosystem staff macroeconomic projections for the euro area, which foresee annual real gdp growth in a range between 1. 5 % and 2. 3 % in 2011 and between 0. 6 % and 2. 8 % in 2012. compared with the march 2011 ecb staff macroeconomic projections, the range for 2011 has been revised upwards, while the range for 2012 remains broadly unchanged. the june 2011 eurosystem staff projections are broadly in line with recent forecasts by international organisations. in the governing council ’ s assessment, the risks to this economic outlook remain broadly