european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, and mr lucas papademos, vice president of the european central bank, frankfurt, 2 december 2004. * * * ladies and gentlemen, the vice - president and i will now report on the outcome of today ’ s meeting of the governing council of the ecb. all in all, the short - term outlook for inflation remains worrisome, but our assessment of price developments over the medium term is unchanged. at the current juncture oil price developments are having a sizeable impact on consumer prices in the euro area, while there is no significant evidence that stronger underlying domestic inflationary pressures are building up. accordingly, we have left the key ecb interest rates unchanged at their historically low levels. at the same time, we recognise the existence of upside risks to price stability over the medium term. continued vigilance is of the essence with regard to those risks. i shall now explain our assessment in more detail, turning first to the economic analysis. after the positive developments in the first half of 2004, economic growth has moderated in the second half. in the third quarter of the year, real gdp growth is estimated to have been only 0. 3 % quarter on quarter, after 0. 7 % and 0. 5 % in the previous two quarters. according to eurostat, the contribution of net exports turned negative, reflecting in particular high import growth, and private consumption was subdued, probably dampened by higher oil prices. at the same time, investment growth increased and inventories were built up. the available survey information for october and november points to ongoing growth in the fourth quarter, albeit at a more moderate pace than in the first half of this year. the conditions remain in place for economic growth to proceed. on the external side, while global growth is showing some signs of moderation, it nonetheless is expected to remain robust. euro area exports should continue to benefit from global demand conditions. on the domestic side, investment should be supported further by the very favourable financing conditions in the euro area, improved earnings and greater corporate efficiency gained through business restructuring. finally, scope exists for private consumption to strengthen, particularly if uncertainties surrounding the extent and pace of fiscal consolidation and structural reforms are reduced. accordingly, we expect a gradual recovery in euro area activity over the next two years, with somewhat more moderate growth rates due to the impact of oil prices. this is

, a europe - wide framework for bank resolution is being set up, a single resolution mechanism with a resolution fund. we have thus taken a big step towards solving the toobig - to - fail problem. the resolution mechanism will also serve to protect the central bank, because it makes possible a europe - wide, orderly winding - up of a systemically important institution, without the governing council having to worry about the side effects on financial stability of a short - term withdrawal of liquidity. effective supervision and the orderly resolution of banks thus also support the ecb ’ s monetary policy mandate. it helps the central bank to carry out its task, that is, to provide liquidity assistance, without it having to worry about overstepping its mandate. improving the monetary policy transmission the eurosystem offers liquidity to banks to maintain financial intermediation in the money market and to improve the transmission of monetary policy. for this transmission to work optimally, a stable financial sector is needed. for banks are the most important channel via which our monetary stimulus is passed on to businesses and households. and only healthy banks can perform their role as lenders. so monetary policy - makers and banking supervisors however, article 14. 4 of the statute of the european system of central banks and of the european central bank ( statute of the escb ) assigns the governing council of the ecb responsibility for restricting ela operations if it considers that these operations interfere with the objectives and tasks of the eurosystem. such decisions are taken by the governing council with a majority of two - thirds of the votes cast. for further information, please see : https : / / www. ecb. europa. eu / pub / pdf / other / 201402 _ elaprocedures. de. pdf? e716d1d560392b10142724f50c6bf66a. bis central bankers ’ speeches are very interested in having sound banks with viable business models that can lend money to the real economy. but how does the single supervisory mechanism support the monetary policy transmission? first, the comprehensive assessment, i. e. the health check of the banks, plays an essential role. the assessment of bank balance sheets aims to uncover bad debts and to place all banks with a solid capital base under the supervision of the ssm. and this assessment can have a catalytic effect. prior to the health check, most banks accelerated their deleveraging or built up their equity. the