peter praet : europe ’ s economic recovery and implications for monetary policy remarks by mr peter praet, member of the executive board of the european central bank, at the international conference of commercial bank economists ( iccbe ) in france, paris, 6 july 2017. * * * since june 2014, the ecb has introduced a range of unconventional measures, alongside our conventional ones, in pursuit of its price stability objective. together, these measures have proved to be extremely effective in preventing a period of disinflation from spiralling into one of deflation. nearly three years on, the risks of deflation have vanished and the transmission of our policy measures to the real economy is clearly evidenced by the recovery, which has gathered some further momentum recently. before turning to price developments and monetary policy, let me say a bit more about the latest economic developments in the euro area. the solid upswing continues to broaden across sectors and countries. real gdp in the euro area has expanded for 16 consecutive quarters, growing by 1. 9 % year - on - year during the first quarter of 2017, according to eurostat. this compares with the latest potential growth estimates for the euro area of just over 1 %. 1 moreover, recent survey data point to a strong start to the second quarter. for example, the composite output purchasing managers ’ index – which is strongly correlated with growth in the euro area – remains close to six - year highs in june. the forward - looking components of the survey continue to point to growth in the quarters ahead. moreover, economic sentiment is at its highest level in nearly a decade and has increased notably from may to june 2017. 2 unemployment is at its lowest level in eight years. looking ahead, the latest eurosystem staff macroeconomic projections point to a continued economic expansion at a somewhat faster pace than previously expected. the breadth of the economic recovery is also notable. the dispersion of growth rates across both countries and sectors is at its lowest level in two decades, reflecting a convergence of growth rates around higher levels. this is reassuring for the growth outlook because recoveries tend to be firmer and more robust when they are broad - based. it ’ s a similar picture for employment, with dispersion of employment growth rates across euro area countries at its lowest level on record. the increasingly solid cyclical recovery reflects the success of our monetary policy measures, which have worked their way through the financial system and led to a significant easing of financing conditions for consumers

purpose does not include repayment of interest or principal on the newly underwritten securities. notably, even if these firewalls were lifted, a bank would still be required to hold capital against all credit enhancements and credit extended to customers of its section 20 affiliate. section 23b of the federal reserve act would require that such credit and credit enhancements be on an arm ’ s - length basis. similarly, the federal anti - tying statute would prohibit a bank from offering discounted credit enhancements on the condition that an issuer obtain investment banking services from a section 20 affiliate. thus, for example, a bank could not offer such credit enhancements below market prices, or to customers who were poor credit risks, in order to generate underwriting business for a section 20 affiliate. the firewall prohibiting lending to retail customers for securities purchases during the underwriting period addresses one of the most important potential conflicts of interests arising from the affiliation of commercial and investment banking : the possibility that a bank would extend credit at below - market rates in order to induce consumers to purchase securities underwritten by its section 20 affiliate. the concern here is not only safety and soundness but customer protection. the securities exchange act of 1934 already prohibits a broker - dealer ( including a section 20 affiliate ) from extending or arranging for credit to its customers during the underwriting period. still, we recognize the act would not apply in the absence of arranging and, unlike the firewall, would not cover loans to purchase a security in which a section 20 affiliate makes a market. section 23b of the federal reserve act, and to some extent section 23a, would address some of these remaining concerns, but perhaps not all. the board will be reviewing the comments on this firewall carefully. capital requirements the next group of firewalls i will discuss imposes capital requirements on a bank holding company and its section 20 subsidiary. these firewalls require a bank holding company to deduct from its capital any investment in a section 20 subsidiary and most unsecured extensions of credit to a section 20 subsidiary engaged in debt and equity underwriting ; they also require the section 20 subsidiary to maintain its own capital in keeping with industry norms. these requirements apply only to section 20 subsidiaries and not to any other nonbank subsidiary of a bank holding company. the board proposed to eliminate the capital deductions for investments in, or credit extended to, a section 20 subsidiary. the original purpose of the deduction was to ensure that the holding company