##ilience requires joint efforts at both the national and european levels. at the national level, we need to pursue reforms that promote sustainable economic convergence, and increase the growth potential and resilience of local economies. at the european level, i welcome the agreement reached by the euro summit in december last year on a euro area budgetary instrument aimed at fostering competitiveness and convergence. this could help the implementation of structural reforms and strengthen resilience in the euro area. however, the euro area would also benefit from a common stabilisation function – which is not foreseen under the december agreement. such an instrument could provide macroeconomic support in the event of euro area - wide recessions, thereby maintaining convergence and reducing the burden on monetary policy. with a predominantly bank - based financial system, completing the banking union also remains a key priority. agreeing on a backstop to the single resolution fund through the european stability mechanism is an important step in this direction. political momentum is also needed to agree on the missing third pillar of the banking union, the european deposit insurance scheme ( edis ). there were calls to first reduce risks in the banking sector before starting to share them, and considerable risk reduction has indeed taken place in recent years. edis would mitigate the risk of financial fragmentation by providing an identical level of depositor protection across the euro area. with the end goal of a fully fledged edis, the ecb welcomes the establishment of a high - level working group to agree on the path we need to follow to achieve this goal. furthermore, we need to continue making progress in deepening the single market, including by developing a genuine capital markets union ( cmu ). deep and well - integrated cross - border funding would improve the private sector ’ s capacity to absorb local shocks, reducing the burden on fiscal policies. here as well, renewed ambition is needed. revamping the cmu agenda can play an important role in adapting the eu ’ s financial architecture in view of brexit. it can also enhance the eu ’ s attractiveness to international investors, and thus help to strengthen the international role of the euro. these reforms not only address the weaknesses of the institutional framework, they also ensure that the euro will be able to face tomorrow ’ s challenges. as leaders renewed their political commitment to strengthen emu at the euro summit in december, we need to capitalise on this commitment and translate it into concrete policy actions ahead of the upcoming european elections. 3 /

lending rates to euro area firms and households remain close to historically low levels. the most recent bank lending survey confirms that credit standards remain favourable and loan demand continues to increase. together with solid earnings expectations and firms ’ balance sheets, these favourable funding conditions should support business investment. labour market dynamics remain strong, with euro area unemployment at 7. 9 % in december, its lowest level in more than ten years. rising wages should continue to underpin household income and private consumption. lower energy prices are supporting real incomes and should provide an additional impetus to domestic demand. turning to inflation, high levels of capacity utilisation should continue to strengthen labour cost pressures. growth in compensation per employee increased to 2. 5 % in the third quarter of 2018, having increased steadily since 2016. growth in negotiated wages also picked up in the course of 2018. moreover, wage growth has become increasingly broadbased in recent years. this, together with our monetary policy measures and the ongoing 1 / 3 bis central bankers'speeches economic expansion, is expected to translate into higher underlying inflation over the medium term. monetary policy stance in this environment of downside risks to the growth outlook, the governing council decided at its last monetary policy meeting in january to retain its policy stance, confirming the enhanced forward guidance on policy rates and reinvestment. the governing council carefully reviews all incoming data with regard to their possible implications for the medium - term inflation outlook. more concretely, we continuously assess whether inflation is converging towards our inflation aim – that is to levels of below, but close to, 2 % – in a sustained manner. although near - term growth is likely to be weaker than foreseen, in our view, the conditions for ongoing economic growth remain in place – supportive financing conditions, favourable labour market dynamics and rising wage growth. these will continue to underpin the euro area expansion – and thereby contribute to gradually rising inflation. at our meeting in january, we kept our current policy configuration in place. at the same time, we acknowledged that persistent uncertainties and signs of lower than expected nearterm growth call for increased caution. significant monetary policy stimulus remains essential to support the further build - up of domestic price pressures and headline inflation developments over the medium term. indeed, the end of our net purchases in december last year does not imply that our monetary policy has become less accommodative. in fact, ample monetary policy accommodation is still provided by our forward guidance on the key ecb interest rates, which