for italy and spain, for example, are now back around levels observed in the summer of 2011. moreover, cds spreads have gone down in all countries. second, bank and firm borrowing conditions have relaxed. corporate bond spreads in stressed countries have declined substantially, affording creditworthy companies better access to market funding. this has been observed not only for highly rated large corporations but also for other corporations, for the financial as well as the non - financial sector. third, banks have been able to re - access the market, for both funding and raising capital. also, the strong divergence in funding costs across countries has fallen. deposits outflows have been reversed : deposits by euro area residents at banks in stressed countries have increased by about 210 billion euros since august 2012. these improvements in the form of reduced fragmentation can be summarized by the downward trend in target balances. these have been reduced by about 300 billion euros or some 30 % decline from their peak one year ago. they have now returned to levels observed before the two three - year ltros at the end of 2011. see m. brunnermeier, and y. sannikov, 2012. “ redistributive monetary policy ”, paper prepared for the 2012 jackson hole symposium, princeton university. see b. cœure, 2012. “ central banking, insurance and incentives ”, speech at the ecb conference on “ debt, growth and macroeconomic policies ” frankfurt, 6 december. bis central bankers ’ speeches in sum, these indicators point to significant benefits from omt for corporations, banks as well as individuals in all euro area countries. fears of a possible euro area break - up have receded and impairments to the transmission mechanism have been partly reduced. why omts are robust does this favourable market response mean that omts do not raise concerns? the answer is : no, but these concerns have been intensely discussed in the governing council, and adequately mitigated. the relaxation of financial turmoil is, in itself, not sufficient for a positive assessment of omts. in fact, for omts to be successful, they have to not only eliminate risk in the market, but they have to do so in a controlled and incentive compatible way. it has been argued that : • first, government bond purchases undermine incentives for reform at national level ; • second, government bond purchases expose the ecb to balance sheet risk that may eventually lead to fiscal redistribution among euro area countries ; and • and third, government bond

benoit cœure : outright monetary transactions, one year on speech by mr benoit cœure, member of the executive board of the european central bank, at the conference “ the ecb and its omt programme ”, organised by the centre for economic policy research, the german institute for economic research and the kfw bankengruppe, berlin, 2 september 2013. * * * i am grateful to f. holm - hadulla and a. saint - guilhem for their contribution to this speech ; all views expressed remain mine. introduction ladies and gentlemen, one year after the inception of the ecb ’ s outright monetary transactions ( omts ), financial markets in the euro area are in much calmer conditions and fragmentation is receding. yet, omts have created turmoil elsewhere : in the hallways of economics faculties, newspaper commentaries and, maybe, dinner tables across europe ; today, it is not government bond spreads but emotions that are running high. i very much welcome this debate. it is important for citizens to inform their view on monetary policy decisions, and public debate among experts can help them arrive at a balanced assessment. the euro being shared by 330 million europeans, it is crucial that such debate brings together different european perspectives. it cannot serve the euro well to take a parochial view to its future. i am therefore grateful to the organisers for setting up this conference and inviting me to explain the rationale and key design features of omts. let me address three issues – and come back to them in turn : • first, the necessity of omts. here, i will recall the circumstances that made omt necessary. • second, the effectiveness of omts. i will explain why omts were effective from a monetary policy perspective. • finally, the robustness of omts. i will show that the design of omts is robust to the criticisms that have been raised in the public debate. why omts are necessary so let me start by addressing why omts are necessary. here, two things have to be appreciated : first, all ecb ’ s policy actions and instruments fully serve our objective of price stability in the euro area as a whole and, second, one year ago, we were facing serious challenges in achieving precisely this objective. so, let me elaborate. at the time when omts were announced in august 2012, financial fragmentation had created widely divergent borrowing costs for firms and households across euro area countries. as a result, the transmission of monetary