see, for instance, caballero, r., hoshi, t. and kashyap, a., “ zombie lending and depressed restructuring in japan ”, american economic review, vol. 95, 2008, pp. 1943 – 1977, peek, j. and rosengren, e., “ unnatural selection : perverse incentives and the misallocation of credit in japan ”, american economic review, 95, 2005, pp. 1144 – 1166, and nishimura, k. g. and kawamoto, y., “ why does the problem persist? ‘ rational rigidity ’ and the plight of japanese banks ”, the world economy, vol. 26, 2003, pp. 301 – 324. bis central bankers ’ speeches beginning of the 1990s, entry rates of firms declined from their pre - crisis peak of above 7 % to a range of 4 – 5 %, whereas firm exit rates remained subdued at their pre - crisis levels throughout the 1990s. 10 the lesson from this experience is to recognise non - performing loans in a timely manner and have strong institutions in place to deal with the restructuring. this reduces uncertainty and avoids adjustment delays. for the euro area, it is a call to move forward in completing the banking union. supervision and resolution up until now, supervisory and resolution authorities have operated at the national level. during the crisis this set - up has revealed pitfalls on three fronts. first, differences in supervision maintain humps and hollows in the euro area playing field, thereby distorting competition ; second, differences in implicit state guarantees affect banks ’ funding conditions ; and third, differences in resolution frameworks – or a lack thereof – distort investor conditions across jurisdictions. the envisaged european banking union is meant to address these three pitfalls. first, the single supervisory mechanism ( ssm ) will level the playing field in supervision. only a month ago, on 12 september, the european parliament paved the way for this truly european supervisory body. i hope that the council will soon give its final consent. the ecb will then take over supervision of euro area banks in the second half of 2014. we will ensure that euro area banks are supervised in a consistent and stringent manner. this implies impartial supervisory decisions across all member states. we are already in the midst of preparations to make sure we reach this goal. the ecb is currently working on the methodological design for a comprehensive assessment. we will communicate details on

have predicted some years ago. in 1999 the average rate of consumer price increases in the euro area as a whole was among the lowest recorded since the second world war and, at 1. 1 %, remained fully consistent with price stability. at the same time, monetary union does not mean perfect identity of economic conditions in all parts of the euro area. the experience of all larger currency areas shows that some differences in regional price developments and also in regional output growth may exist. as differences in national or regional developments cannot be addressed by the eurosystem, they require, whenever necessary, country - specific responses. this means, in particular, responsible national wage settlements and appropriate national fiscal policies aimed at counteracting specific national problems. in addition, reforms addressing rigidities in labour and product markets and aiming at enhancing labour and capital mobility are the tools to ensure that market mechanisms will play an increasingly important role in limiting the scope for divergent developments in the euro area. the single monetary policy offers a great opportunity to maintain price stability in the euro area and to create the conditions needed for sustained economic growth. currently, the prospects for strong economic growth in the euro area are very favourable - indeed, more favourable than they have been for many years. economic activity in the euro area strengthened markedly in the second half of 1999 and this upswing is expected to continue through 2000 and beyond. available forecasts point to real gdp growth of slightly over 3 % in 2000 and 2001, reflecting both the favourable external environment and strong domestic demand. in line with this positive outlook, employment is expected to increase further and unemployment to come down in this context. at this juncture, it remains, indeed, important that the expected improvements in economic conditions and labour market prospects are not jeopardised by inappropriate wage settlements. in fact, wage moderation, combined with structural reforms in the labour markets, would help both to contain inflation in the euro area and to lead to further progress with employment creation. the contribution of monetary policy to strong and sustained economic growth is to ensure that price stability in the euro area will be maintained in the years to come. the governing council has, over recent months, raised ecb interest rates in three steps, in total by 1 percentage point, as a response to signals from both pillars of the eurosystem ’ s monetary policy strategy that upward risks to price stability were increasing. since the last meeting of the governing council, which was held on 16 march 2000, the main new data released relate to