have my doubts in that respect. credit institutions in southern europe are currently not suffering from a lack of liquidity. the european central bank has ensured that through a number measures over past months. rather, many banks are hesitant in extending loans because they believe that there is too great a risk that debtors will not be able to redeem them. i do not expect that the ecb purchasing government bonds on a large scale would change that in a sustained manner. instead, banks must again be in a position to see that their borrowers have decent economic prospects. how could that be brought about? above all, national governments could contribute to this goal by implementing effective structural reforms to improve the competitiveness of industry. if a company is competitive, it has a future, the risk of default is lower and banks extend loans with lower risk margins. draghi ’ s reasoning is different. he wants to boost economic activity by using the purchase programme to bring interest rates in the crisis countries down still further. bis central bankers ’ speeches interest rates are already very low. in italy and spain, for instance, the yields on ten - year government bonds are just below the yield on comparable us bonds. how much more should yields decline and how large must a programme be to achieve such a decline? in addition, i am asking myself whether, by forcing yields down further, we would not encourage governments to increase their debt again, instead of focusing on sustainable budgetary and economic policies. that would be the exact opposite of what is necessary. the federal reserve system, too, has bought government bonds for trillions of dollars in recent years – and was successful. does that not give you reason to rethink? the comparison with the fed is misleading because we have a different economic and political set - up in the euro area. moreover, the bond purchases undertaken by the fed were particularly successful as long as the yields on government bonds were still comparatively high, i. e. immediately after the major financial crisis in 2008. in europe, the yields on government bonds are comparatively low even today. doubts similar to yours have also been expressed by jens weidmann, president of the bundesbank. in the governing council, however, there is a majority in favour of the plans announced by draghi. do you not fear that the german representatives at the ecb are yet again adopting a dangerous minority position? there is little point, in my view, to speculate about majorities in the governing council before the discussion of

ongoing trends. one is the increasing convergence among euro area countries across a range of indicators. the dispersion of both employment and gdp growth between euro area countries is now at record low levels. the previous divergence in credit conditions has also largely disappeared. for very small loans – which are a proxy for the financing conditions facing smes – the spread between vulnerable and less vulnerable countries has fallen from 170 basis points in mid - 2014 to 2 basis points today. for the first time since 2009, loans to firms are moving into positive territory in all major euro area economies. and demand for loans by firms, which at this time last year was still negative in several vulnerable countries, is now positive across the whole euro area. 6 the other trend is the growing resilience of the financial sector. the total capital ratio of significant banks has increased by more than 170 basis points since early 2015. their return on equity has risen from 4. 4 % at the end of 2015 to 7. 1 % at the start of this year, even as their leverage ratios have declined. all banks have benefited from the upward trend in returns on assets since the start of our monetary policy easing in 2014, although in some cases starting from low levels. clearly this trend hides some variation among banks, which is largely driven by differences in their business models. as regards bank profitability, ecb research finds little evidence that our monetary policy is currently doing harm. net interest income has remained quite stable over the past two years. if there are any negative effects of low rates on net interest income in the future, they should be largely offset by the positive effects of monetary stimulus on the other main components of profitability, such as the quality of loans and therefore on loan - loss provisions. 7 low - for - long interest rates might contribute to a build - up of financial risks, and this has to be carefully monitored. at present we do not see systemic risks emerging at the euro area level. if there are some local pockets of risk, the defence lies in micro - prudential and macro - prudential policies, not changing area - wide monetary policy. furthermore, in such an environment any backtracking on financial regulation would be a mistake, as the pre - crisis experience has shown. the outlook for inflation and the ecb ’ s recent policy decisions 2 / 5 bis central bankers'speeches despite this progress on the real side of the economy, from a monetary policy perspective our task is not complete, as we