##ive power for headline inflation over the one to two - year ahead horizon, has been around 2 % for more than a year. domestic inflation, which closely tracks services inflation, has edged down, but it remains high ( at more than 4 % ) mostly because wages and prices in certain sectors are still adjusting to the past inflation with a delay. wage growth has also been moderating. 1 / 4 bis - central bankers'speeches the december eurosystem staff projections expect inflation to average 2. 1 % in 2025 and to return sustainably to our target rather early in the projection horizon. economic activity the outlook for the euro area economy, however, remains weak and subject to significant uncertainty. output grew above expectations in the third quarter of 2024. this was mainly driven by an increase in consumption, which partly reflect one - off factors that boosted tourism over the summer, and by firms building up inventories. the latest information suggests that the economy is losing momentum. surveys indicate that manufacturing is still contracting and growth in services is slowing, as still - high energy prices, regulatory costs and the lagged effects of previous monetary policy tightening continue to bite. firms are holding back on investments, and exports remain weak, with some european industries struggling to remain competitive. the labour market remains resilient, with employment growing in the third quarter of 2024, again by more than expected, and the unemployment rate remaining at its historical low of 6. 3 % in october. overall, the december projections see growth in 2024 at 0. 7 %. looking ahead, the conditions are in place for growth to strengthen over the projection horizon, although less than was forecast in previous rounds. as the catching up of wages continues and as inflation falls, rising real wages should lead to stronger household spending. more affordable credit should boost consumption and investment. provided trade tensions do not escalate, exports should also support the recovery as global demand rises. growth is projected to be just above 1 % in 2025 and to move slightly up to modest levels in 2026 and 2027. nevertheless, the risks to economic growth remain tilted to the downside. the risk of greater friction in global trade could weigh on euro area growth by dampening exports and weakening the global economy. in particular, the outlook is characterised by high uncertainty around future trade policies in the united states, political and fiscal policy uncertainty in some large euro area countries as well as global geopolitical risks. in fact, over the past year the european

##top mechanism to provide this temporary liquidity funding. we therefore encourage all eu stakeholders to resume discussions on setting up a european - level public backstop to ensure liquidity is provided to banks facing resolution in a timely and effective manner. the incompleteness of the banking union is a significant impediment to creating a truly integrated banking sector in europe and optimising its competitiveness. achieving this goal means removing unnecessary barriers to cross - border banking and enabling crossborder groups to manage liquidity and capital at the group level. a fully integrated, cross - border european banking landscape would not only make banks more efficient 3 / 6 bis - central bankers'speeches but also more resilient to domestic shocks, by enabling them to diversify their risks and revenue streams. this would contribute to private risk sharing and enhance the overall economy's robustness and efficiency, benefiting european citizens. let me now turn to the second element of what is missing in europe's financial architecture : the capital markets union. the capital markets union and the banking union are complementary projects. progress on the capital markets union provides opportunities for banks and vice versa. and deepening the capital markets union is vital for the european economy to attract the necessary private investments to support innovation and the digital and green transitions, thus bolstering eu competitiveness. for banks, this means more cross - border activities, which would make them more competitive compared with their international counterparts. in a more integrated paneuropean capital market, banks could fully exploit economies of scale by offering similar products and services across multiple countries. targeted harmonisations across member states could facilitate such cross - border lending, enabling banks to better assess risks and opportunities from borrowers in other member states. completing the banking union would significantly accelerate the push towards a truly integrated european banking landscape. securitisation is another measure to advance the capital markets union where banks play a key role. given the constraints on banks'balance sheets, capital markets can complement bank lending and increase the financing available to the private sector while transferring risks to other intermediaries. securitisation is crucial as it provides a diversified funding base for banks, a tool to transfer credit risks and new assets for investors. this can also create space for additional lending to the economy. tackling emerging risks – non - bank financial institutions and rising geopolitical risks while non - banks may help in financing the significant needs of the twin green and digital transition, they also necessitate adequate regulation and