time alleviate the problem of weak profitability in the remaining banks. in addition, we need a developed european capital market, which also provides capital to young, ambitious and risk - taking firms in europe and continues to finance them throughout their growth phase. a functioning capital market is necessary for mastering the enormous challenges facing us today : climate change, digitalisation and demographic trends. the european capital markets union can play a significant role here. monetary policy and asset price bubbles the last narrative i would like to discuss this evening is the claim that loose monetary policy leads to price bubbles in the financial and real estate markets. fears that monetary policy entails risks for financial stability should indeed be taken very seriously. in fact, one objective of the current expansionary monetary policy is to revive risk appetite among investors, and thus promote growth and investment activity. it is normal for asset prices to rise during phases of low interest rates. equity prices, for example, reflect firms ’ discounted earnings expectations. if the interest rate falls, equity prices will go up, because future earnings will have a greater bearing on current valuations. however, earnings expectations themselves also tend to increase when interest rates are lowered, because investors anticipate stronger economic growth. and, indeed, the current price / earnings ratio in the euro area is a long way off from the excesses of the dotcom bubble of 2000, and it is closer to its historical median than in other economies ( slide 25, left - hand side ). nonetheless, central banks need to keep a close eye on such valuations, as purely liquidity - driven price gains can result in risks for financial stability in the long term. asset price bubbles pose a particular risk when they are largely credit - driven. this is typically more likely to apply to real estate than to equities. that is why developments in real estate prices are rightly coming under particular scrutiny. residential real estate prices in germany have risen appreciably in recent years, especially in the larger cities, and the deutsche bundesbank has repeatedly pointed to possible price excesses. two factors are significant here. first, prices always reflect the interplay of supply and demand. the pronounced price increase in german towns and cities reflects a noticeably stronger demand for housing that was unmatched by any corresponding expansion of supply. there was a stronger influx of people to the towns and cities and a simultaneous increase in the demand for housing space per person. the low interest rates are likely to have further fuelled the demand

above all, the effects on asset prices. are german savers being “ expropriated ”? let me begin with the narrative on the “ expropriation ” of german savers. first, it should be pointed out that there is no entitlement to high interest rates on savings, which is what the term expropriation implies. and it is not part of the ecb ’ s mandate to ensure high interest rates for savers. yet, it is important to consider the facts and figures. so far only a relatively small proportion of the deposits of private households in germany have in fact been directly affected by negative interest rates ( slide 17, left - hand side ). in the euro area it is even fewer ( slide 17, right - hand side ). more so, from a historical perspective, the current return on savings deposits is not at all as untypical as many observers suggest ( slide 18 ). the reason is that what ultimately really matters for savers are real interest rates, that is, interest income less inflation. a high nominal interest rate is of little benefit to savers if, at the same time, the purchasing power of money has fallen by a similar or greater amount. that was the situation in the 1970s. many observers may be surprised to learn that the average real interest rate for savings and demand deposits in germany since the introduction of the euro is around the average of the previous 24 years. moreover, germany consists not only of savers, but also of borrowers, taxpayers, property owners and, of course, workers. for the population as a whole, there is, for the period from 2007 to 2017, for a representative german household, even a small plus on the bottom line of the interest account, i. e. not taking into account wealth effects ( slide 19, left - hand side ). an average net saver may indeed have received around €500 per year less in interest income. however, an average net borrower has saved almost €2, 000 each year in interest payments. in addition, there are more than €400 billion in interest rate savings for the german general government since 2017. if the figures are broken down by income group, you can see that the middle income group, which is the group with the most borrowers, were the winners of the low interest rate policy ( slide 19, right - hand side ). in addition, among the distributional effects of monetary policy, its positive effects on the labour