economy will have to be monitored very closely. in my opinion, three factors require particular attention. first, it is necessary to gauge the true extent of the us slowdown, its possible spread to the world economy and the possible impact on exchange rates. second, at the european level, the effect of the turbulence on the cost and availability of financing for the private sector will have to be calibrated. finally, the possible impact on corporate and consumer confidence will have to be monitored carefully. the signs identified in these latter two channels, i. e. credit and economic sentiment, will be particularly informative for euro area economic growth when they affect countries in which consumption growth is still somewhat hesitant. i also believe that, echoing the words of the ecb president after the governing council meeting, this is an appropriate time to reiterate the firm commitment of monetary policy to the objective of price stability, which is the best way to promote the sustained growth of output and employment and thus the welfare of european citizens in general and of spaniards in particular. in fact, these events have taken place at a time when the spanish economy, too, continues to show considerable buoyancy that is prolonging its already long expansionary phase. output grew in the first half of this year at a rate of around or slightly above 4 % ( in line with the performance in the closing months of 2006 ) and the vigour of activity was compatible with a more even balance between domestic and foreign sources of spending. in particular, the contribution of net external demand, which trimmed two percentage points from growth in certain months of 2004 and 2005, improved in 2006 and continued to do so in the first half of this year. at the same time, the share of business investment in domestic demand has continued to rise at the expense of private consumption and residential investment. the process of normalisation of monetary and financial conditions that commenced at the end of 2005 has contributed effectively to achieving this more balanced composition of spending. moreover, the healthy performance of the world economy in 2006 and, in particular, the recovery of the euro area have spurred exports after several years of weakness. on the supply side, the growing availability of labour resources in a highly expansionary demographic setting helped to smooth the adjustment of activity to this robust demand, preventing excessive cost and price pressure from building up. indeed, the inflation rate fell to around 2 % ( 2. 2 % in july and august ), taking the differential with the euro area to half a percentage

luis m linde : recent economic developments in the euro area and in spain, and important financial system projects address by mr luis m linde, governor of the bank of spain, at the annual conference 2013 of the asociacion de mercados financieros, madrid, 25 november 2013. * * * let me first thank the asociacion de mercados financieros, and its chairman, my good friend enrique prados, for kindly inviting me to accompany you today in this annual conference. the association – which draws together a large number of financial market professionals – performs important work in channeling initiatives aimed at contributing to the better working of those markets. their active collaboration with regulators in devising rules, their participation in public consultations and their educational role are all to be welcomed. my address today will be brief, so as not to outstay my welcome and encroach on your first course. it shall focus on three projects of particular importance for our financial system in the area of market infrastructures. but allow me first to comment on recent economic developments in the euro area and in spain, developments that point, as we know, to a turn for the better. to the euro area first. after six consecutive quarters of contraction, second - quarter gdp in the area this year posted positive growth of 0. 3 % in quarter - on - quarter terms ; in the third quarter it has held at a positive rate, albeit one of only 0. 1 %. the recovery thus seems to be holding, but it should be acknowledged that expectations for economic growth in the area continue to be very moderate in the short and medium term. the ecb continues with an expansionary policy stance. we have reached an all - time low in the interest rates on the main refinancing operations, now at 0. 25 % ; since july, a forward guidance policy has been pursued, conveying to economic agents the ecb ’ s decision to keep interest rates low for a prolonged period and to maintain generous liquidity provision. maintaining and stepping up this expansionary monetary policy has naturally had to do with the recent course of inflation, proxied by the consumer price index, which stood in october at 0. 7 % for the euro area as a whole, a rate substantially off the target of 2 %. against this background, the first signs of the start of a recovery in the spanish economy have begun to emerge. as you know, in the