the market. we need a certain amount of flexibility, because market conditions can change quickly. is the ecb still in control of affairs, especially now that self - imposed purchase limits are becoming increasingly relevant? we are able to conduct our asset purchase programme. the important thing here is that we want to remain market - neutral. and we shouldn ’ t overdo the discussion on the composition of the €30 billion. including reinvestments, we will still be buying securities for more than €50 billion in some months. the question of whether we invest, say, €1 billion more or less in corporate bonds is not decisive. to what extent have the governing council ’ s discussions been affected by the steinhoff issue – that is, losses resulting from the purchase of bonds issued by the beleaguered furniture retailer – especially given that council members hold very different views on corporate sector asset purchases? the steinhoff case hasn ’ t resulted in any discussion in the governing council about changing the asset purchase programme. we have certain rules regarding the suitability of individual instruments. we don ’ t blindly buy 100 % of a given bond, we watch the market constantly. the important thing for me is that we don ’ t take on excessive risk. we also keep a constant eye on our risk management framework and adjust it if we see a need to do so. the governing council doesn ’ t want to consider raising interest rates until “ well ” after the end of net qe purchases, which is known as “ sequencing ”. this follows the example of the federal reserve in the united states. but the federal reserve never had negative rates. doesn ’ t at least the negative deposit facility rate need to be scrapped more quickly? the slightly negative interest rates support our asset purchase programme. if we had not had them, we might have needed to buy greater volumes to achieve the same effects. but the net purchases are becoming increasingly less significant. and the sequencing is something that the markets have understood very well. so we need to move step by step towards a normalisation of our monetary policy, we shouldn ’ t rush it. 2 / 5 bis central bankers'speeches but isn ’ t the negative rate a special case? there are very different views about negative interest rates. we haven ’ t seen any excessive distortions so far, and the advantages predominate. but this does not lead me to conclude that we should hang on to negative rates for a long time to come. can you imagine that a whole

adjustment in unit labour costs and the adjustment in the harmonised index of consumer prices ( hicp ) reflects the lack of competition in the domestic economy. it also reflects other cost factors affecting the evolution of prices, including fiscal consolidation being partly achieved through higher indirect taxes and administrative prices. 5 it calls for great determination in reducing the excessive profit margins that result from monopolistic competition, in particular in sectors sheltered from international competition. 6 reducing rents is not only a matter of efficiency in the adjustment process : it is also a matter of equity in sharing the burden of adjustment. and this point leads me to the second part of my talk. the aggravating factors [ slide 7 ] the adjustment has been costly, in some cases very costly. some of the costs in terms of falling output and employment were, unfortunately, unavoidable. in particular, some of the job losses in the non - tradable sector are the outcome of the necessary rebalancing towards tradables and away from previously unsustainable domestic demand growth. however, the rise in unemployment in a number of countries has been aggravated by delays in structural reforms and, as i said, by a lack of downward flexibility in prices and wages after 2008. job losses were largest among low - skilled, temporary workers in spain and in the non - manufacturing sectors. 7 as employment fell, unemployment – particularly of the young – jumped, especially in greece and spain, where more than a quarter of the total labour force is currently without a job. there was also a sharp increase in unemployment in the baltic states – it rose from 5 % in 2007 to 18 % in 2010 on average in estonia, lithuania and latvia. however, since 2010 in all three countries unemployment has fallen relatively quickly. by the end of 2012 it had improved by about 10 percentage points. 8 in the most stressed euro area countries, there are no signs of a reversal yet. this is the result of the inherited very rigid product and labour markets, which have started to change and need to continue to do so vigorously to prevent further job losses. again, this is not only a matter of efficiency, but also a matter of equity. europe cannot afford a lost generation. see ecb monthly bulletin box ( 2012 ), rebalancing of competitiveness within the euro area and its implications for inflation, june 2012, pages 64 – 66. the higher profit margins of the past two years need to be interpreted carefully as they in part represent a rebound after