potential growth as before for a while. could europe experience what japan has experienced? i don ’ t think so. the development in wages will be always different from japan. there is more rigidity in wages in a recession ( in europe ) and that is an important factor and that is why i never really feared we would have actual deflation in europe. wages will not be as flexible down as they were in japan. most of euro area gdp comes from services and inflation in services is basically about wage developments. it is very difficult to go to a situation of deflation in europe. that ’ s a difference with japan. will divergence continue in the euro zone? no. we saw an initial phase of catching up and convergence. then came the crisis. if you look to the development of the economy in the u. s. and europe, the recoveries are very similar until 2011. then europe had a double dip because of the recessionary adjustment. after painful adjustment and many reforms, ireland, spain, portugal, slovenia and cyprus grew faster than the euro area average in the first half of this year. the only exception is italy which is growing slightly less than the average. we have growth again. we need to strengthen the confidence in peripheral countries. that has to be achieved by deepening integration. the greek turmoil raised doubts. these doubts have to be now closed by additional institutional reforms. what doubts were raised about the euro? it raised doubts for the markets that countries like greece could cope with the challenges of monetary union. there was never any doubt among the majority of member countries. we maintain that the euro is irreversible. legally, no country can be expelled. the actual prospect of that happening was never for real. do you fear that some people in europe may lose faith in its institutions? at the ecb, we are doing the utmost within our mandate. we are aware that there are excessive expectations about what central banks can do. unemployment is destabilizing the continent. european values are being eroded in several countries as a result of the fear that unemployment creates. it is for other policy makers to do their job. does a change in the stance of the federal reserve have implications and has market volatility become a permanent feature? we don ’ t know what the reaction of markets will be. monetary policy is not about fine tuning volatility in financial markets. we have medium term objectives and that helps to stabilize expectations. central banks should be independent from financial

scope, if the necessity is there. if the price of oil does not continue to go down ( it cannot go down indefinitely ), we will see a jump in inflation in the last quarter of this year. but we may have before that some months of negative inflation. until now we have not seen a reason to doubt that the programme will work. the staff projections are recent, predicated on the completion of the whole programme and foresee inflation at 1. 7 % by 2017. but we are prepared for any contingency. what can monetary policy do for growth and potential growth? monetary policy affects growth via financial conditions, which affect expenditure decisions, investment and the aggregate demand. what is more difficult for monetary policy is to affect potential growth. that depends very much on the growth of labour supply, technological progress, increasing productivity, organization of production. that ’ s the supply side. the effects of monetary policy on that are very indirect. europe has a big problem of low potential bis central bankers ’ speeches growth. it starts with demography : the working population is decreasing, so productivity has to be increased even more to compensate for it. potential growth is very low and in present conditions, we fear that this will be a protracted period of low growth. this prospect of protracted low growth is shared by all advanced economies. so europe has to do more in terms of supply side reforms, investment, productivity growth to get out of this situation. is embracing immigration important for europe? in general yes. but there are two dimensions to this : one is the medium to long term issue of immigration and demographic developments, and the other is the short term crisis of refugees that raises a lot of logistical issues, among others. to me, it ’ s clear that immigration is one of the things that can improve the demographic potential of europe, which is necessary, if europeans think and care about the welfare of future generations. the size of the working age population of the euro area is declining 0. 6 percent a year until the 2030s. that ’ s huge. to change the demographic trends, promoting birth is not enough, is also has to be done through immigration, if this is to be corrected. if not, we ’ re creating a great difficulty to growth and to the welfare of future generations. this is a very acute problem because for years europe has been doing the sort of collective demographic suicide and no one is thinking about this. in the short term, the backlash against immigration has been dramatic