of enhanced credit support helped restoring a more normal transmission of our monetary policy stance and ensuring that banks could maintain their crucial role in financing the real economy. the ecb also engaged in a covered bond purchase programme worth €60 billion throughout the euro area. the covered bond market is important in our economy and it was vital to re - start and support its functioning. in may 2010 increasing market concerns about the sustainability of public finances led to severe tensions in certain market segments, which were hampering the transmission mechanism of monetary policy and thereby the effective conduct of our efforts to maintain price stability. once more the ecb decided on appropriate measures. private financial intermediation was again threatened. with the rapid increase in secured interbank lending in the euro area in recent years, the impact on money markets of developments in government bond markets has grown substantially. government bonds have traditionally been an important element in the monetary policy transmission process because they serve as a benchmark for the pricing of other financial contracts and fixedincome securities. they have also emerged as a prime source of collateral in interbank lending. as a result abrupt changes in the value or availability of these securities can imply a sharp deterioration in banks ’ funding conditions – with adverse effects on both the supply of bank loans to the real economy and their prices. all our non - standard measures help to restore a more normal monetary policy transmission mechanism, which is necessary to fulfil our primary mandate of maintaining price stability in the medium term. in recent weeks, the tensions associated with the irish fiscal problems and the reorganisation of its banking sector have led to renewed bouts of high volatility in financial markets. more than ever it is important that governments step up consolidation in way that is credible and lays the foundation for sustainable long - term growth. there is a clear need to strengthen public confidence in the capacity of governments to return to sustainable public finances and thus support sustainable growth over the medium term. to this end, it is essential that countries pursue credible multi - year consolidation plans and fully implement the planned consolidation measures. positive fiscal developments that may emerge, reflecting factors such as a more favourable than expected economic environment, should be exploited to make faster progress with fiscal consolidation. europe ’ s economy : the current situation and the challenges ahead let me come to the third and final part of my remarks : what are the lessons we have learned from these events? first, our monetary policy strategy has proved to be effective. the quantitative definition of price stability and the medium - term orientation

in may 2016, compared with 1. 2 % in april. developments in loans to enterprises continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) remained broadly stable at 1. 6 % in may, after 1. 5 % in april. the euro area bank lending survey for the second quarter of 2016 indicates further improvements in loan supply conditions for loans to enterprises and households and a continued increase in loan demand across all loan categories. furthermore, banks continued to report that the targeted longer - term refinancing operations had contributed to more favourable terms and conditions on loans. the monetary policy measures in place since june 2014 have significantly improved borrowing conditions for firms and households, as well as credit flows across the euro area. the comprehensive package of new monetary policy measures adopted in march this year underpins the ongoing upturn in loan growth, thereby supporting the recovery of the real economy. in the light of the prevailing uncertainties, it is essential that the bank lending channel continues to function well. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to preserve an appropriate degree of monetary accommodation in order to secure a return of inflation rates towards levels that are below, but close to, 2 % without undue delay. monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. as emphasised repeatedly by the governing council, and as again strongly echoed in both european and international policy discussions, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the european level. the implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. structural reforms are necessary in all euro area countries, although specific reform needs differ across the individual economies. the focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation. the enhancement of current investment initiatives, including the extension of the juncker plan, progress on the capital markets union and reforms that will improve the resolution of non - performing loans will also contribute positively to this objective. in an environment of accom