take place solely on secondary markets, where bonds that have already been issued are traded. if interventions take place, they will involve buying government debt from investors, not from governments. all this is fully consistent with the treaty ’ s prohibition on monetary financing. moreover, they will focus on shorter maturities and leave room for market discipline on longer maturities. second, omts will not compromise the independence of the ecb. the ecb will continue to take all decisions related to omts in full independence. it will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. the fact that governments have to comply with conditionality will actually protect our independence. the ecb will not be forced to step in because of a lack of policy implementation. third, omts will not create excessive risks for euro area taxpayers. such risks would only materialise if a country were to run unsound policies. this is explicitly prevented by the esm programme. and we have been very clear that each time a programme starts being reviewed, we will routinely suspend operations and resume them only if the review has been concluded positively. this will ensure that the ecb intervenes only in countries where the economy and public finances are on a sustainable path. finally, omts will not lead to inflation. we have designed our operations so that their effects on monetary conditions will be neutral. for every euro we inject, we will withdraw a euro. in our assessment, the greater risk to price stability currently is associated with the possibility of falling prices in some euro area countries. in this sense, omts are not in contradiction to our mandate : in fact, they are essential for ensuring we can continue to preserve price stability. moreover, we have no evidence that the announcement of the omt programme has affected inflation expectations. they continue to be firmly anchored. this is testament to our track record on price stability over the last decade and our credible commitment to preserving it. we have all the necessary tools at our disposal to maintain it and to withdraw any excess liquidity in case of upward risks to price stability. since the announcement of the possibility to undertake omts, there have been several signs of greater tranquillity in financial markets : the significant decline of sovereign spreads, the resumption of capital flows by money market funds in the united states, which had stopped for about a year, some issues of corporate and sovereign bonds from countries that had lost access to the market for

economy declined only little, if at all. and in a others still, some lending rates have actually risen. why this divergence? the concept of “ monetary policy transmission ” is fundamental to the activities of a central bank, i. e. the process by which changes in the benchmark rate of interest of a central bank are transmitted through the financial system to the real economy. in a system that is working properly, there is a stable relationship between changes in the central bank ’ s rates and the cost of bank loans for households and firms. central banks can thus influence the overall economic situation and maintain price stability. but the financial system of the euro area has witnessed a severe fragmentation of the single financial market. the costs of bank financing differed greatly in different countries. many banks, and in some countries the entire banking system, have in fact had no access to the euro area interbank market. increases in interest rates on government securities have bis central bankers ’ speeches exacerbated the funding costs of domestic banks and severely limited their access to markets. this has made difficult the transmission of impulses coming from an accommodative monetary policy through adjustments in interest rates on loans to households and firms by banks. interest rates do not have to be identical across the euro area, but it is unacceptable if significant differences arise because of the fragmentation of capital markets or the perception of a break - up of the euro area. in an economy like that of the euro area, where about threequarters of corporate finance comes from the banking sector, the impact on the real economy, investment and employment are serious. the fragmentation of the single financial market has led to a fragmentation of the single monetary policy. for this reason, the countries most exposed to the crisis of confidence were not able to take advantage, except to a limited extent, of the low rates of interest : they had entered a vicious circle. economic growth was falling. public finances were deteriorating. banks and governments were being forced to pay even higher interest rates. and credit growth was falling further, leading to rising unemployment and reduced consumption and investment. the outlook for the euro area economy as a whole was increasingly fragile. there were potentially negative consequences for europe ’ s single market, as access to finance was increasingly influenced by location rather than creditworthiness and the quality of the project. the disruption of the monetary policy transmission has profound implications. it threatens the single monetary policy and the ecb ’ s ability to ensure price stability in both directions. this