by the european central bank ’ s governing council. as regards the first condition, the impairments to the monetary policy transmission mechanism have noticeably declined, not least thanks to the monetary policy measures carried out by the european central bank, in particular the development of omts. the euro area is confronting a slow but steady recovery. certain member states that in 2011 and 2012 were subject to market overreactions are now seeing signs of positive growth. irrespective of the fact that yields for government bonds have reacted in varying degrees to new economic developments, there has been a clear reduction in the yield spreads compared to the situation in 2012. it is not the aim of omts to harmonise interest rates regardless of the differences between member states ’ macroeconomic or budgetary situation. concerning the second condition, two euro area member states are currently undergoing esm macroeconomic adjustment programmes. however, none of these programmes allow primary market purchases through the esm to the government bonds market. in conclusion, i can state that omts are in principle available as monetary policy instruments. the conditions for their crisis and location - related activation are, however, not currently met. possible volumes and potential risks for the federal budget with regard to the possible volume of omts it remains the case that no ex ante quantitative limits are set on the size of omts in order to prevent market participants from adjusting to this situation and using these instruments for their own purposes to the detriment of the effectivity of the monetary policy instruments put in place. notwithstanding this, the possible volume of omts is in fact quantitatively limited to one to three - year government bonds, which are suitable for omts. government bonds with a maturity of on to three years form only a small part of the entire volume of government bonds. the court of justice of the european union has confirmed that it follows from this that the commitments that the european central bank enters into are, in fact, circumscribed and limited. in order to ensure that maturities are not significantly shortened, it is foreseen that the european central bank ’ s governing council will closely monitor the maturity structure and the termination of new issues of government bonds in the concerned member states. thus the volume of omts is limited in a variety of ways. in assessing the potential risks of omts it should be taken into account that, in principle, the use of monetary policy instruments to maintain price stability entails financial risks for the eurosystem. this applies not

. what happens in this scenario if the central bank has an inflation target? when inflationary pressure in the economy increases, the central bank will tighten monetary policy so as to prevent the inflation target from being exceeded. such a course of events would result in an unfavourable policy mix. the stimulation provided by fiscal policy would be counteracted by the monetary policy, which would mean that even the positive short - term effects of the stimulation would decrease or even become negative. moreover, if the stimulation provided by fiscal policy is very powerful, this could lead to expectations of an increased risk that the inflation target cannot be upheld, which would then lead to rising inflation expectations and higher risk premiums on swedish interest - bearing papers. households and companies may feel growing uncertainty both about developments in public revenues and expenditure, and about the formulation of monetary policy. this can be costly for the economy if it leads to a failure to carry out investments and to unnecessarily cautious decisions about the allocation of resources. to sum up, then, it becomes more costly to pursue an excessively expansive fiscal policy when monetary policy is guided by an explicit inflation target. a good policy mix makes for better conditions a better policy mix arises if the orientation of fiscal policy does not make for higher inflation risk premiums. it can avoid this if the orientation of fiscal policy appears to be sustainable in the long run. the surplus - target in the public finances is a good example of this. one means by which the confidence felt by the general public in economic policy can be monitored consists of inflation expectations, which should not diverge substantially from the riksbank ’ s inflation target. when expectations of inflation diverge from this target in the longer term - whether upwards or downwards - it implies that monetary policy should be adjusted so as to steer expectations back towards the target. in this connection it is important to observe that a central bank whose inflation target commands high credibility often has more scope for acting than one that has little credibility. assume, for example, that an economy where the credibility of the inflation target is high experiences a positive disturbance to the business cycle, leading to higher demand. since the inflation risk premiums are low, employees will not need to demand extra high nominal wages to insure themselves against unexpectedly high inflation. this is because it can be anticipated that the central bank will tighten monetary policy. this in turn will mean that less stringent measures will probably be required than would be needed by a central bank that had not yet