real gdp declined by 0. 1 %, quarter on quarter, in the third quarter of 2012, following a contraction of 0. 2 % in the second quarter. available data continue to signal further weakness in activity in the fourth quarter and at the beginning of 2013. this weakness reflects the adverse impact of low consumer and investor sentiment on domestic expenditure, as well as subdued foreign demand. however, financial market sentiment has improved and the latest survey indicators confirm earlier evidence of a stabilisation in business and consumer confidence, albeit at low levels. later in 2013 a gradual recovery should start, with domestic demand being supported by our accommodative monetary policy stance, the improvement in financial market confidence and reduced fragmentation, and export growth benefiting from a strengthening of global demand. the risks surrounding the economic outlook for the euro area continue to be on the downside. they relate to the possibility of weaker than expected domestic demand and exports, slow implementation of structural reforms in the euro area, as well as geopolitical issues and imbalances in major industrialised countries which could both have an impact on developments in global commodities and financial markets. these factors have the potential to dampen the ongoing improvement in confidence and thereby delay the recovery. bis central bankers ’ speeches according to eurostat ’ s flash estimate, euro area annual hicp inflation was 2. 0 % in january 2013, down from 2. 2 % in november and december and from 2. 5 % in october. on the basis of current futures prices for oil, inflation rates are expected to decline further to below 2 % in the coming months. over the policy - relevant horizon, in an environment of weak economic activity in the euro area and well - anchored long - term inflation expectations, underlying price pressures should remain contained. risks to the outlook for price developments continue to be seen as broadly balanced over the medium term, with upside risks relating to higher administered prices and indirect taxes, as well as higher oil prices, and downside risks stemming from weaker economic activity and, more recently, the appreciation of the euro exchange rate. turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued. the annual growth rate of m3 decreased to 3. 3 % in december 2012, from 3. 8 % in november. shifts from overnight deposits to short - term time deposits led to a decrease in the annual rate of growth of m1, which declined to 6. 2 % in december, from 6. 7 % in november, and outflow

. they are not representing their country, but are obliged to take decisions on the basis of euro area - wide considerations. regional or national monetary policy does not and cannot exist in the euro area. there is only one, single monetary policy for the euro area as a whole. therefore, the ecb should develop into a truly european institution. this is a process that will inevitably take some time, but my feeling is that we are already making good progress. the execution of monetary policy is to a great extent decentralised. it is in large part carried out by the ncbs. the ecb and the 11 ncbs together are referred to as the eurosystem. if we refer to the ecb and the 15 ncbs of all eu member states, we speak of the european system of central banks ( escb ). the general council of the ecb meets quarterly and comprises the president and vicepresident of the ecb and the 15 governors of the ncbs of all the eu member states. this body does not make decisions on monetary policy, but discusses issues concerning the relationship between the “ ins ” and the countries i prefer to call “ pre - ins ”, such as exchange rate issues. the third decisionmaking body of the ecb is the executive board of the ecb, comprising the six executive directors of the ecb. the executive board is responsible for current business and the implementation of monetary policy as decided by the governing council. the staff of the ecb will, in the course of this year, reach a level of between 750 and 800 and is likely to grow further in the years ahead. the ecb is one of the most, if not the most, independent central bank in the world. its independence and that of the participating national central banks are firmly enshrined in the maastricht treaty. members of the governing council are not allowed to take or seek instructions from anybody, politicians included. politicians are not allowed to give such instructions. members of the governing council have a term of office of at least five years. the ecb is financially independent. the independent status of the ecb fits into the recent worldwide trend of granting independence to central banks. this tendency is evidenced by both practical experience and academic research. by shielding monetary policy decisions from political interference, price stability can be maintained without having to give up economic growth. indeed, in that sense having an independent central bank is a good thing for all concerned. the reason for central bank