of continued weak monetary growth. together with the negative annual rate of growth in loans to the private sector ( equal to – 0. 6 % in january 2010 ), the latest data support the assessment that the underlying pace of monetary expansion is moderate and that, in the medium term, the inflationary pressures associated with monetary developments are low. the growth of m3 and loans to the private sector is likely to remain weak also in the coming months. at the same time, actual monetary developments are likely to be weaker than the underlying pace of monetary expansion, on account of the downward impact of the steep yield curve. this fosters the allocation of funds away from m3 and into longer - term deposits and securities. on the other hand, the narrow spreads between the interest rates paid on different m3 instruments imply a low opportunity cost of holding funds in the most liquid components included in m1, which continued to grow at a robust annual rate of 11. 5 % in january. the negative annual growth of loans to the private sector conceals ongoing opposite developments : positive, strengthening annual growth in loans to households on the one hand and negative, declining annual growth in loans to non - financial corporations on the other hand. such differences are consistent with historical patterns and cyclical regularities, which suggest that loans to non - financial corporations can be expected to remain weak for some time after economic activity has picked up. at the same time, the cost of financing for enterprises has declined and the sector as a whole has continued to make extensive use of market - based financing as a substitute for bank financing. banks have continued to reduce the size of their overall balance sheets over the past few months, but the challenge remains for them to manage this adjustment while ensuring the availability of credit to the non - financial sector. to address this challenge, banks should use the improved funding conditions to strengthen their capital bases further and, where necessary, take full advantage of government support measures for recapitalisation. to sum up, the current key ecb interest rates remain appropriate. taking into account all the information and analyses that have become available since our meeting on 4 february 2010, price developments are expected to remain subdued over the policy - relevant horizon. the latest information has also confirmed that the economic recovery in the euro area is on track, although it is likely to remain uneven. overall, the governing council expects the euro area economy to grow at a moderate pace in 2010, in an environment marked by continued uncertainty. a cross - check of the outcome of the

data. the other expansionary measures are expected to provide a further contribution of 0. 3 percentage points. since much depends on what intervention is taken and how it is implemented, to make any comprehensive assessment it will be necessary to await further details ; the priority assigned to forms of investment support is certainly a welcome development. the government has requested authorization from parliament to increase the deficit from that indicated in the new policy scenario, by up to 0. 4 percentage points of output, in order to finance greater spending necessitated by exceptional events, in particular to secure italy ’ s territory and buildings and to manage migration flows. the current policy scenario does not take account of the effects on output of these eventual extra expenses. for the subsequent two years ( 2018 - 19 ), the gdp growth forecasts in the current legislation scenario are unchanged with respect to april ’ s estimates ( 1. 2 per cent in 2018 and 1. 3 per cent in 2019 ) ; the policy scenario, by contrast, has revised them downwards, by 0. 2 percentage points a year. this change likely reflects the nature of the planned interventions and, in particular, the remodelling of the expected increases in indirect taxes. 2. the public finances in 2016 compared to april ’ s economic and financial document, the update slightly modifies the estimates for this year. net borrowing is expected to reach 2. 4 per cent of gdp, one tenth of a point more than in the april forecast. the variation is mostly ascribable to lower growth expectations ; running counter to this was the downward revision of capital expenditure and the upward revision of direct taxes. although the new estimate is less favourable, the deficit is nonetheless expected to contract compared with 2015 ( from 2. 6 to 2. 4 per cent of gdp ). available data on the cash balance and revenues are compatible with the government ’ s estimates for net borrowing. at least in the first seven months of 2016 ( compared with the year - earlier period and taking account of the effects of the main operations that have no impact on net borrowing and of a number of temporal asymmetries ), it can be estimated that the general government borrowing requirement has improved by slightly more than what would be consistent with the government ’ s estimates of net borrowing for this year. the government ’ s forecasts of greater direct tax revenues in 2016 are in line with the trends observed so far in revenues for the state budget. in the first eight months of the year, net of lotteries and other