mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 8 november 2012. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today ’ s meeting of the governing council. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. owing to high energy prices and increases in indirect taxes in some euro area countries, inflation rates are likely to remain above 2 % for the remainder of 2012. they are expected to fall below that level in the course of next year and to remain in line with price stability over the policy - relevant horizon. consistent with this picture, the underlying pace of monetary expansion continues to be subdued. inflation expectations for the euro area remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. economic activity in the euro area is expected to remain weak, although it continues to be supported by our monetary policy stance and financial market confidence has visibly improved on the back of our decisions as regards outright monetary transactions ( omts ). at the same time, the necessary process of balance sheet adjustment in large parts of the financial and non - financial sectors as well as high uncertainty continue to weigh on the economic outlook. it is essential for governments to support confidence by forcefully implementing the necessary steps to reduce both fiscal and structural imbalances and to proceed with financial sector restructuring. the governing council remains firmly committed to preserving the singleness of its monetary policy and to ensuring the proper transmission of the policy stance to the real economy throughout the euro area. as we said before, we are ready to undertake omts, which will help to avoid extreme scenarios, thereby clearly reducing concerns about the materialisation of destructive forces. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp contracted by 0. 2 %, quarter on quarter, in the second quarter of 2012, following flat growth in the previous quarter. as regards the second half of 2012, the available indicators continue to signal weak activity. while industrial production data showed some resilience in july / august, most recent survey evidence for the economy as a whole, extending into the fourth quarter, does not signal improvements towards the

and implement reforms fast. the natural tendency for most politicians is to favour gradual adjustment. “ gradualists ” say that in case of fast changes the risk of possible policy mistakes is higher, leading to losses in physical and human capital. opponents of that view, including myself, certainly acknowledge those risks. but we feel that the costs of delayed action may sometimes outweigh its benefits, as postponing the inevitable and failing to accept the changed reality will lead to additional unnecessary costs. one should not want to keep alive old structures that clearly cannot be sustainable in the changed world for longer than necessary. this is a waste of limited resources and reduces long - term productivity. there is a saying that “ a crisis should not be wasted ” – negative shocks to an economy should lead to productivity gains. our experience shows that quick decision - making and decisive policy actions can shorten the period of uncertainty that also weighs on economic activity. people and entrepreneurs in countries with delayed reforms overreact, leading to a higher level of risk aversion than necessary. overshooting in risk aversion results in lost jobs and postponed investments. bis central bankers ’ speeches estonia, for example, lost almost 20 % of its gdp during the crisis. by now we have regained the pre - crisis level, contrary to many countries that preferred to delay the necessary reforms. some of them still face years of decreasing economic output. in summary, i would like to stress that prolonged fiscal consolidation and structural reforms can lead to unnecessary costs to the society. some countries have chosen to delay the pain and take only gradual steps with their structural reforms, but this has in fact resulted in a reduction of the overall economic activity to the extent that might be no less than the shortterm cost of a quicker adjustment. the difference is that they are still not done and cannot hope for a rebound that might otherwise be there. bis central bankers ’ speeches