mario draghi : hearing at the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, for the hearing at the committee on economic and monetary affairs of the european parliament, strasbourg, 14 july 2014. * * * mr chairman, honourable members, allow me to start by congratulating all of you on your election to this house, and you, mr chairman, on your appointment as chair of the committee in the new legislative period. the architects of monetary union conceived the ecb as a central bank with a clear mandate and with strong provisions for its independence. but for a public institution in a democratic society, independence can never come without being commensurately transparent and accountable to the elected representatives of the people. our regular exchanges of views are a key channel for the ecb to discharge its duty of central bank accountability ; hence, they plays an essential role in providing the ecb with the necessary legitimacy to fulfil the tasks assigned to it by the treaties. to underscore our commitment to transparency, the ecb has recently decided to go a step further by publishing regular accounts of the monetary policy meetings of the governing council, which is intended to start in january next year. it is in this spirit that i am looking forward to our exchange of views over the next five years. and, therefore, without further ado, let me go into the substance for today : first, i will share with you our assessment of the economic outlook for the euro area. second, i will explain the package of policy measures we adopted at the beginning of june. finally, i will briefly touch upon the challenges that await us in the next five years. economic outlook let me start with the economic outlook : in the first quarter of 2014, euro area gdp grew by 0. 2 %. growth was thus positive for the fourth quarter in a row. in line with earlier expectations, domestic demand has increasingly become the main source of growth. for the second quarter, monthly indicators have been more mixed, however partly reflecting technical factors. overall, looking through the usual volatility in monthly indicators, the ongoing moderate recovery is expected to continue. looking further ahead, domestic demand can be expected to continue to support growth – together with both the further monetary policy accommodation that was introduced in june and the on - going improvement in financing conditions. the progress made in fiscal consolidation and structural reforms, as well as gains in real disposable income

term, monetary and, in particular, credit dynamics remain subdued. the annual growth rate of loans to the private sector remains negative. to a large extent, weak loan dynamics continue to reflect primarily the current stage of the business cycle, heightened credit risk and the continuing adjustment of financial and non - financial sector balance sheets. 2. financial fragmentation and sme financing let me now turn to the second topic namely the financing of smes. it is important to recall that the euro area financial system is mainly bank - based : around 80 % of the debt of nonfinancial corporations consists of bank loans. there can be no sustained recovery without a sound banking system capable of effectively intermediating funds across the whole euro area. over the recent past, this intermediation process has suffered from two issues : first, financial fragmentation, between peripheral and core countries ; and second, higher challenges for smes relative to large firms. on the first issue, lending rates are very heterogeneous across euro area economies. this reflects divergent bank funding conditions as well as country - specific macroeconomic developments that affect the creditworthiness of borrowers. the ecb took action, within our mandate, to alleviate this fragmentation : explicitly, we took action that alleviated funding constraints and reduced the dispersion of bank funding costs not least through the three - year long - term refinancing operations ( ltros ). still, the dispersion in lending rates across countries and borrowers remains substantial. bis central bankers ’ speeches as regards the second issue, access to financing is more challenging for smes than for large firms. spreads between bank lending rates for small - sized loans and large loans are still high by historical standards, although they have broadly declined since the last quarter of 2012. difficult access to credit by smes is an issue for investment and growth in parts of the euro area, especially in countries under strain. in spain, for instance, the interest rate on small loans is almost 2. 3 percentage points greater than interest rates on large loans. in france, by contrast, the difference is only 1 percentage point. given their high dependence on bank credit, smes in countries under strain suffer particularly from financial fragmentation. in this context, the commission and the european investment bank ( eib ) are looking into possible ways to support sme financing, notably in the form of joint risk - sharing instruments. these would combine the lending capacity of the eib and the european investment fund as well as