disposal. only then, and as a last resort, should it have access to a temporary and fiscally neutral public backstop, the contributions to which should be paid by the private sector either via ex post levies or, more normally, as a result of the reprivatisation of the intermediary institutions ( e. g. bridge banks ) or other good assets resulting from the resolution process. progress in these elements of a future banking union is very important in the present economic environment of low growth. part of the european problem has to do with the situation of the banking sector : pressed for capital, intending to deleverage and risk averse in bis central bankers ’ speeches managing credit risk. consequently, credit is being contained although it is virtually impossible to disentangle the contribution of supply restrictions versus weak demand in explaining the average decline of credit to the economy. in the markets there is the suspicion that banks ’ balance - sheets need more repair with full recognition of potential losses and that is also affecting the lending behaviour of banks. no one has provided clear evidence that this is true and that is why the balance - sheet assessment that the ssm has to conduct before actually starting supervision is so important to re - establish market confidence in our banks to reduce their funding costs. therefore, the establishment of the ssm, the possible use of direct european recapitalisation and the creation of a single resolution mechanism will decisively contribute to the desirable separation of banks and sovereigns. to regain market confidence, restoring full banking sector health must be a priority in order to create improved growth prospects. this is why the banking union project is crucial at this particular moment. economic growth in europe is now essential to complete the adjustment and the rebalancing that have been going on. therefore, it is of paramount importance that the momentum is maintained towards implementing structural reforms at national level and towards building a stronger economic and monetary union through european institutional reforms. i trust that the european parliament will continue to play an active and positive role in this process. i thank you for your attention and stand at your disposal for questions. bis central bankers ’ speeches

support employment, wage - setting should become flexible and aligned with productivity. these reforms will help to regain competitiveness, increase employment, set the foundations for sustainable growth and support the return of confidence. it is worth noting that several stressed countries already did significant reforms which are reflected in the competitiveness gains since 2008 in terms of relative unit labour costs ( ucls ). in fact, since then and in relation to other euro area members, ireland reduced its unit labour costs by 19. 4 %, spain by 9. 5 %, greece by 8. 9 % portugal by 6. 6 % and italy by just 0. 1 %. the reductions achieved against their more significant 36 trading partners were even higher and, more importantly, the gains since 2008 sizably reduced the cumulative evolution of their ulcs since 1999. the significant losses of competitiveness from the inception of the euro and the beginning of the crisis in 2008 have been meanwhile corrected. in fact, relatively to the other euro area members from 1999 to the end of last year greece reduced its ulcs by 5. 8 % and portugal by 2. 4 % whereas spain increased theirs by only 2. 9 % and ireland by 1. 6 %. these improvements in competitiveness were also reflected in significant reductions of the external accounts of all the stressed countries. the latest commission economic forecast indicates that for 2013 all stressed countries will have an external surplus with the exception of greece with a deficit 2 % of gdp well below previous results. the adjustment efforts of the countries under market stress have been positive and certainly have also contributed to the improved financial market conditions. looking back at 2012, reforms at the european level implied that significant progress has been made in putting in place the necessary building blocks for a deeper and more stable emu. europe ’ s leaders recognised the need to complement emu with a banking union, a fiscal union, a genuine economic union and eventually a deeper political union. we now have bis central bankers ’ speeches an ambitious agenda and a clear long term vision. the progress towards sound public finances has been underpinned by institutional reform. new rules were applied to strengthen oversight of budgets and to monitor emerging macroeconomic imbalances more effectively. the signature of the fiscal compact was a significant milestone in this regard. looking ahead we need to remain ambitious, with the ultimate aim to secure stability and prosperity for the euro area. this year should be aimed toward putting these decisions into practice by focusing on their proper implementation. completing banking union i would now like