, a policy of forward guidance has been adopted, involving the more accurate communication of the projected behaviour of official interest rates in the future. yet we should remember that the capacity of monetary policy to resolve the problems at the root of this crisis is very limited. what it can do, and is doing, is making time so that other players who do have the proper tools to resolve the problems can adopt the measures needed, and so that such measures may take effect. the other european economic authorities, starting with the commission, have – in close collaboration with national governments – taken significant steps towards correcting the weaknesses exposed in the euro's institutional arrangements. thus, a permanent mechanism, the european stability mechanism, has been set up, with the capacity to provide funds to the member states deprived of access to the capital markets. and an ambitious reform of overall economic governance has been launched, strengthening the mechanisms to align national economic policies with the aims of the union as a whole and designing a plan to move towards a deeper and sounder union in four stages : banking union, economic union, fiscal union and, finally, political union. highly significant progress has already been made in the first of these four areas. in november next year the new single supervisory mechanism will begin to operate within the ecb, and it should be complemented by a single bank resolution system and, later, a single resolution authority and a common resolution fund although, as is known, these latter steps pose complex legal and political problems that might delay their effective start - up. national governments, too, have reacted within their remit. on one hand, to contain the worsening of public finances, one of the main imbalances underlying the european strand of the crisis. and on the other, to make markets more flexible and to promote investment, growth and employment. since late last year the quantitative and, above all, the qualitative indicators have improved markedly. in the second quarter this year, there was a year - on - year increase of 0. 3 % in euro area gdp. this positive figure has put an end to six consecutive quarters of contraction. the rise in output has been across the board, spanning both domestic and external demand. looking ahead, the estimates available indicate that gdp in the euro area will grow once more in the third and fourth quarters of the year, albeit at moderate rates, underpinned by the improved international setting and by an accommodative monetary policy, both of which bis central bankers ’

gap ” that emerged during the 1980s precedes the us savings and loans crisis ; that observed in the second half of the 1990s precedes the collapse of the dot - com bubble ; and growing credit excesses are apparent from 2005, before the onset of the current crisis. considerations of this type support the ecb ’ s emphasis on monetary analysis, including a regular assessment of credit developments, as a central aspect of the framework for preparing monetary policy decisions. more specifically, we have always foreseen that a close monitoring of monetary and credit developments constitutes an important element in identifying asset price misalignments that may threaten price and macroeconomic stability. the ecb continues actively to conduct research along these lines, in the context of its continuing enhancement of monetary analysis. 9 see ( inter alia ) : d. gerdesmeier, b. roffia and h - e. reimers ( 2009 ), “ asset price misalignments and the role of money and credit ” ecb working paper no 1068 ; and r. adalid and c. detken ( 2007 ), “ liquidity shocks and asset price boom / bust cycles ” ecb working paper no 732. see : l. alessi and c. detken ( 2009 ), “ real time early warning indicators for costly asset price boom / bust cycles : a role for global liquidity ” ecb working paper no 1039. see : j. stark ( 2007 ) : “ enhancing the monetary analysis ” speech at the conference “ the ecb and its watchers ix ”, september 2009. figure 1 global excess credit at times, the ecb ’ s decision to pay close attention to monetary and financial developments in formulating monetary policy has been controversial. the canonical model of monetary policy neglected the role of monetary aggregates and of their counterparts, emphasising the output gap as the main indicator of inflationary pressures. 10 recent events have forced a re - evaluation of such models in the research community. it seems to me that the ecb ’ s approach has been vindicated by the financial crisis. the importance of monitoring money and credit developments is becoming more recognised in both the academic literature and the policy debate. indeed, leading academics have argued in favour of defining and monitoring new monetary indicators to detect the build - up of leverage within the financial sector. 11 of course, recognising the importance of monetary analysis is not a panacea. it is only the starting - point of a