period of time may help to sustain real income and may therefore stimulate spending. but even if we expect inflation rates to turn positive again by the end of this year, the weak economic outlook for the euro area is expected to keep domestic price pressures contained for some time. according to the eurosystem staff macroeconomic projections, hicp inflation in the euro area is likely to be very moderate, but above zero, on average this year. inflation is expected to pick up, but remain at a moderate level in 2010. forecasts produced by the european commission and other international organisations paint a similar picture. the risks to this outlook are viewed as broadly balanced. however, in the longer term, it is important that the current policy stimulus is withdrawn in due course. d. monetary and financing conditions let me now turn to the monetary analysis, which is particularly useful for assessing risks to price stability in the medium to long term. the latest money and credit data support the assessment of diminishing inflationary pressures in the medium term. the deceleration of broad money growth observed in 2008 increased towards the turn of the year and continues at a rapid pace. developments in money and credit aggregates have been volatile over the past few months. this may be explained partly by the sharp reduction in the key ecb interest rates, which may have encouraged shifts in the allocation of funds. if we disregard this volatility, the continued deceleration in the pace of underlying monetary expansion and in credit growth seems to reflect the sharp deterioration in economic activity. as regards financing conditions in the euro area, external financing costs have been declining since october last year, and particularly sharply since the start of this year. following policy interest rate cuts, bank lending rates have fallen significantly. this indicates that the pass - through mechanism from policy rates to the real economy has continued to function in recent months, even though there is evidence that banks ’ margins have widened. with credit spreads across all rating classes decreasing from their record highs and with stock prices rising, the overall cost of financing for euro area non - financial corporations is diminishing. in general, the recent positive signs from financial markets point to a gradual improvement in confidence among investors. policy measures i will now turn to the policy measures taken in response to the current crisis. both monetary and fiscal policy - makers have reacted in a forceful and timely manner, aiming to restore confidence. and indeed, as regards the eurosystem ’ s monetary policy and liquidity management measures, it seems

jurgen stark : in the aftermath of the global economic crisis – what next? speech by mr jurgen stark, member of the executive board of the european central bank, at the economist conference – 15th roundtable with the government of greece, attica, 18 may 2011. * * * introduction it is a pleasure to be here today. in my introductory remarks i would like to discuss briefly the main underlying causes for the current problems of some euro area countries. such an understanding of the causes is essential in order to develop strategies for “ restoring confidence in the european economy ”, the main topic of this session of the conference. in the remainder of my initial remarks i will then outline the key policy elements of such a strategy, both at the national and at the european level. the majority of emu member states is about to overcome the economic consequences of the global financial crisis. the economic recovery in the euro area has been sustained and has become more broadly based. the economy no longer needs the degree of economic or monetary stimulus as adopted during the height of the crisis in late 2008 and early 2009. economic growth in the first quarter of 2011 has turned out significantly stronger than expected. germany, in particular, is experiencing high growth rates, falling unemployment and a declining government deficit. to a great extent these positive developments are attributable to economic reforms adopted in the past which are now taking effect. some countries, at the euro area ’ s periphery, greece, ireland and portugal, find themselves in a critical economic situation. the origins of the current crisis the current problems in these countries have a number of root causes which have led to significant macroeconomic imbalances and vulnerabilities. in the years prior to the recent crisis, price and costs developments diverged noticeably within the euro area over extended periods of time. the cumulative impact of those differences has meant the gradual but significant erosion of the competitiveness positions in a number of euro area countries. the mechanisms underlying these developments have varied between countries but mostly have been linked with strong growth in domestic demand, relative to the supply capacity of the economy. demand pressures were often related to overly optimistic expectations about future incomes and profits. that triggered high spending, reduced saving and excessive indebtedness by the private sector and often increased risk - taking by the financial sector. this process was often exacerbated by low real interest rates and an insufficiently tight fiscal stance. even where headline fiscal numbers such as the deficit or the debt ratio still suggested a healthy fiscal