on non - productive spending. in fact, there is only one way to durably raise the growth potential of our economies, and that is by structural reforms that enhance competitiveness. it is clear that the euro area is well equipped to confront the challenges of the 21st century. with 370 million consumers and high purchasing power, it remains the biggest market in the world. it is also the most economically integrated area, with highly qualified manpower and very good infrastructures. too often, however, euro area countries are prevented from reaping the benefits of their position by the rigidities that have accumulated over time, during the periods of easy growth. now, the international environment is more challenging : new and powerful competitors have emerged and comparative advantages are shifting. there is no alternative to adjustment. in this field too, the euro area has made considerable progress over recent years, especially in the countries that had a particularly large competitiveness gap vis - a - vis the rest of the zone and which, as a result, fell deeper into the crisis than their neighbours : • we have seen a significant improvement in cost competitiveness as measured by unit labour costs ( ulc ). between 2008 and 2012, in the three programme countries ( greece, portugal and ireland ) cumulated ulc growth stood about 12 percentage points below the euro area average. • the current account balances clearly show a strong correction. in the three programme countries, the current account balances as a percentage of gdp improved by more than 9 percentage points between 2008 and 2012. in spain, the current account deficit improved by more than 7 percentage points over the same period. most of the adjustment has been driven by a contraction in domestic demand. however, in ireland, spain and portugal export performance has been very strong compared with the pre - crisis period. bis central bankers ’ speeches in total, the euro area generated a trade surplus of more than 1 % of its gdp in 2012 compared with around zero in previous years. we expect this surplus to continue growing in the coming years. the speed and depth of the reforms underway in euro area economies is unprecedented. they have undertaken reforms in the areas most important for competitiveness, growth and the sustainability of public finances such as labour markets, products markets, social security, pension systems, etc. these reforms are a prerequisite for dynamic and sustainable growth in the future and they must be vigorously pursued. in addition to this very clear determination at the different national levels to reduce deficits and introduce the necessary reforms

guidance on our rate policy by saying that we expect the key ecb interest rates to remain at present or lower levels for an extended period of time. all in all, both our standard and non - standard monetary policies have prevented the materialisation of deflation risk. the programme we launched a year ago – outright monetary transactions – succeeded in countering speculation about a euro area break - up. its basic functioning is as follows : if a given state suffers unwarranted tensions on its debt, we could decide to intervene as far as is necessary, provided that state commits to an agreed recovery programme. undoubtedly, the announcement of the creation of the omts had a very strong impact : banks and firms regained access to capital markets ; the spreads between the yields on spanish and german 10 - year bonds fell from more than 6pp in july 2012 to just under 3pp in may 2013, while the premium on italian 10 - year bond halved. this new monetary policy instrument has therefore fostered a considerable improvement in financial conditions in the euro area and represents a solid shield against further speculative attacks. the ecb ’ s governing council has stressed that monetary policy will remain accommodative for as long as necessary. in the period ahead, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability. * * * * * * * * * the euro area is getting stronger : it is undergoing major reforms, building new institutions and setting up powerful crisis management instruments. these major and in many respects historical advances will lay the foundations for the future of our monetary union. bis central bankers ’ speeches the effects on financial markets are already very visible : tensions have abated and signs of defragmentation are starting to appear ( target balances for instance have declined by almost 300 billion€ or 25 % from their peak ). we must now pursue the efforts already initiated and do our utmost to ensure that these improvements feed through to the real economy so that economic growth can return and unemployment can reverse its rising trend. thank you. bis central bankers ’ speeches