top of this, there are external risks : slowing global growth, particularly in large emerging economies. in other words, it ’ s pointless to expect that an eventual increase in quantitative easing will be enough to stimulate investment … quantitative easing, by pushing back the horizon for monetary policy action, removed the financing obstacle. lending rates to enterprises have fallen significantly, including in the stressed euro area countries. what we can do, what we must do, is maintain confidence in inflation returning towards our objective of 2 %. the ecb, within its mandate, cannot accept inflation stabilising in the vicinity of 1 %. you regularly underline the risks of inflation and growth being too low. but there are always risks – the sky could fall in! and many people in germany, as elsewhere, on seeing that they are hardly earning anything on their savings, are wondering if we are ever going to see an end to quantitative easing. today, the risks for growth and inflation are tilted to the downside. the best service that the ecb can provide to the citizens of the euro area is to fulfil its mandate so that inflation returns towards 2 %, which requires the economy to pick up again, jobs to be created and exports to the euro area to find solvent outlets. we are aware that the low interest rates also have negative effects, notably on savings, and could pose risks to financial stability if they were to stay low for too long. we don ’ t want this monetary policy to last too long, but we will apply it for as long as necessary in line with our mandate. bis central bankers ’ speeches in other words? governments need to take action and implement the necessary reforms in order to consolidate confidence and growth, and to demonstrate a credible fiscal policy. if the euro area policy for growth rests exclusively on the ecb ’ s shoulders, things will end badly! admittedly, we are nowhere near that point. but we sense that there is a temptation to rely entirely on the ecb. what key measures do governments need to implement specifically in order to restore growth? it is my personal opinion that, depending on the country concerned, reducing public expenditure or reallocating it towards more productive expenditure is a necessary condition for growth. governments must take strong and concerted action in order to stimulate private investment. europe also needs to have a clear prospect of strengthening the single market, which is still insufficiently integrated as far as services are concerned. moreover, markets need to open up to the rest of the

yves mersch : the causes of monetary policy measures and their impact - a review speech by mr yves mersch, member of the executive board of the european central bank, at the euro finance week, faros institutional investors forum, frankfurt am main, 17 november 2016. * * * “ the knowledge of causes produces a knowledge of effects. ” ( marcus tullius cicero : “ cognitionem causarum enim cognitio eventorum facit. ” topica 67 ) the financial sector is facing an upheaval. many of the changes are intentional and positive. but certainly not all of them. and to understand the individual factors and their interactions better, i ’ ll be taking a closer look today at the causes of our monetary policy measures and their effects. for the european central bank ’ s policy is often referred to as a cause of the current problems in the banking and financial sector. it will quickly become clear that this assumption has its shortcomings. by focusing on the causes of our actions we can understand more easily how to get back to a normalisation of monetary policy. causes : low natural interest rates let us start with the causes. why are interest rates so low? the growth trend has been declining in many mature economies not just since the crisis, but for several decades. there are many reasons for this, which i won ’ t consider here in detail. the fact is, the slowdown in growth has led to lower long - term interest rates. in these circumstances, there is a risk of a self - reinforcing downward spiral as these developments do not go unnoticed by economic actors ; their expectations are worsening. if a company expects demand to fall, it will be less inclined to make big investments. moreover, ageing societies, which exist in many mature economies, not only have to cope with a shrinking labour force, but they also have to save more. this has led to a savings glut and to a shortage of safe assets. so investments are falling and savings are rising. this reluctance to invest is further reinforced when public authorities – with room to manoeuvre as well as existing demand – invest less than is needed even to preserve the capital stock. this dynamic has led to a reduction in the natural interest rate, i. e. the real rate of interest in which savings and investments are in equilibrium in an economy operating at its potential, where there is neither upward nor downward pressure on inflation. the natural rate of interest plays an