a continued risk that protectionism might spread worldwide. this would hit german industry, with its exports - driven business model, particularly hard. at least a few positive signs emerged from the negotiations between the united states and china. it would be a real step forward if the negotiations brought forth an agreement which sees the market being opened up to foreign businesses and intellectual property getting protection. the second factor is brexit. jeremy adler, a british poet and scholar of german literature, said last summer that the united kingdom is heading for a bona fide shakespearean drama when it leaves the eu3. and right now, who is to say his assessment is wrong? as things stand at the moment, the uk will leave the eu on 29 march. if the eu and uk fail to seal a deal, trade will be governed by world trade organization ( wto ) rules. compared with the regime in place today, this would take a considerable toll on goods and services trading. over the long term, the uk economy would probably suffer painful losses in income. the repercussions for the euro area and germany, by contrast, would be less severe and arguably manageable. however, the bank of england warns of short - term disruptions to trade which could plunge the uk economy into recession. the “ old lady of threadneedle street ” simulated a variety of scenarios to reach these conclusions4. in the worst case scenario, uk gdp might slump by as much as 8 %. that would be a more severe recession than after the financial crisis, and it wouldn ’ t leave us unscathed, either. both of these risk factors – the global trade dispute and brexit – are political by nature, and that ’ s why they both need to be defused by politicians. the eurosystem has a mandate to preserve price stability. but if the economy takes an unexpected turn for the worse, monetary policymakers don ’ t have much wiggle room at the moment. unlike the united states, the process of monetary policy normalisation in the euro area is just taking its first baby steps. the ecb governing council decided in december to put an end to the eurosystem ’ s net asset purchases at the end of 2018. it also reaffirmed its intention to reinvest the principal payments from maturing securities until further notice. this will keep the stock of assets on our books at a constant level. and it is this stock of assets that counts for the programme ’ s economic impact

. figuratively speaking, then, the ecb governing council is keeping its foot on the accelerator, but not pushing it down any further. so the degree of monetary policy accommodation will remain exceptionally high – in fact, roughly as high as it was when the crisis was raging. 3 / 10 bis central bankers'speeches in part, this is also due to the persistently low interest rates. the ecb governing council has indicated that it continues to expect key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary. the next steps towards normalising monetary policy will depend on how inflation pans out in the euro area. as things stand today, it is primarily the lower crude oil prices which look set to send the inflation rate this year noticeably lower than the eurosystem staff had projected in december. remember, though, that the ecb governing council defines price stability as a medium - term measure, so we would do well to look beyond these fluctuations. i still expect the persistently upbeat labour market conditions and strong wage growth to gradually strengthen the underlying price pressures in the euro area. some observers are already calling for a very slow and hesitant normalisation of monetary policy, for fear that higher interest rates might cause corporate sector debt servicing to balloon and thus dangerously curtail investment activity. however, recent bundesbank research indicates that debt servicing will probably have a moderate impact5 on account of the significant deleveraging in a number of sectors and countries in recent years. whatever happens, the normalisation process will probably take a number of years, which is all the more reason not to squander any time. you see, monetary policymakers need to regain more leeway to be in a position to respond to an unexpected economic slump. 3 stoking the engines of economic growth ladies and gentlemen, amidst all the urgent questions currently being thrown up by brexit and the trade dispute, there is one thing we mustn ’ t lose sight of : the truly profound challenges facing the euro area are longterm in nature. the european commission ’ s estimates put its long - term growth potential at just 1. 3 % 6. when it comes to ensuring more growth, some look to the central banks. yet monetary policy cannot solve structural problems, and when monetary policymakers do attempt to do this, it is to the detriment of their price stability objective. monetary policy can do no more than give the economy