vitor constancio : monetary policy and the european recovery speech by mr vitor constancio, vice - president of the european central bank, at the xxxi reunion circulo de economia, barcelona, 30 may 2015. * * * ladies and gentlemen, i start by thanking circulo de economia for inviting me to participate in this prestigious event. the theme of this year ’ s conference is on ways to “ consolidate the recovery ”. the ecb ’ s monetary policy measures aim at precisely that : supporting the recovery in order to reach our price stability objective. our policies have however, a broader impact, also being part of the european response to the challenges that the euro area has been confronted with for some time. the first challenge was precisely the need to overcome the situation of low growth and low inflation then prevailing. the second, referred to the necessity of overcoming the financial and economic fragmentation among the members of the monetary union. the third, corresponded to the goal of repairing and strengthening the banking sector in order to improve the financing of the recovery. the last challenge consisted in increasing the rate of potential growth which is essential. in different degrees these challenges are still with us but a remarkable set of initiatives started to deal with them in a more forceful way. besides our own monetary policy decisions, from the outright monetary transactions ( omt ) announcement to the recent asset purchase programme ( app ), we need to recall the banking union project ; the operational start of the single supervisory mechanism in the ecb ; the comprehensive assessment and stress tests that preceded it ; the creation of a single resolution mechanism ; the launch of the european fund for strategic investments aimed at spurring investment and finally, the announcement of the ambitious goal of creating a capital markets union. in my remarks today, i will explain the rationale for the monetary policy measures taken since mid - 2014 and the effects they are having on the on - going recovery. secondly, i will address some financial stability risks portrayed in our just published financial stability review. 1 subsequently, i will reflect on the macroprudential policy framework needed to deal with those risks and on the role that the capital markets union may have in improving the efficiency of our financial system and on the creation of private risk sharing mechanism, particularly important for our monetary union. the rationale for the ecb ’ s monetary policy and its effects on the recovery a phase of active management of the size of our balance sheet and our monetary base, started once inflation

sluggishness of the real economy : without a sustained recovery, inflation risks being pushed well below the target, opening up a scenario that would be difficult for monetary policy to counteract and should therefore be avoided. tommaso zerbi opened the italian constituent assembly meeting of 19 may 1947, during which article 47 of the constitution was discussed and approved, recalling ‘ the cry of millions and millions of small italian savers, the tragedy – without exaggeration – of our entire generation of small savers, who in the last 30 years or so have seen the purchasing power of the lira fall to one one - hundred - and - fortieth of its value in 1913 or to one thirty - fifth of its value in the period between the first and the second world war ’ ( see constituent assembly, session of 19 may 1947, p. 4025 ; only in italian ). 4. financial stability financial stability is the third pillar in the protection of savings. financial crises pose a severe threat to savers because of the destruction of wealth they bring about. 18 banks over the previous decade, italy ’ s banking system suffered the consequences of two recessions within a few years. between 2008 and 2014, gdp fell by 9 per cent, leading to an increase in business bankruptcies and unemployment. 19 non - performing loans rose to 10 per cent of total loans. banks suffered sizeable losses, which in many cases resulted in outright banking crises. that is now a distant memory. the banking system is currently well capitalized and profitable. the stock market valuations of the main financial intermediaries exceed their book values ( figure 4 ), signalling investor confidence in banks ’ ability to generate income in the future. these improvements reflect the efficiency gains achieved by financial intermediaries and the strengthening of prudential rules, as well as the favourable conditions of recent years. 20 public aid during the pandemic crisis, including the expansion of state guarantees on loans to small and medium - sized enterprises, played an important in italy, the global financial crisis of 2007 - 09 led to a drop in equity prices of almost 70 per cent, followed by a slow and partial recovery. the sovereign debt crisis caused further losses, coupled with a sharp fall in house prices. in that period, yearly bankruptcies doubled to more than 15, 000 ; the unemployment rate rose by over 6 percentage points, to 12. 9 per cent. in recent years, the european financial system has been characterized by ample liquidity