prove unsustainable, that the prices therefore should fall and that this on the whole should result in a decline in the real economy in general. the risk of this happening is of course related to your view of residential property prices. if they seem to be highly elevated in relation to before, or are difficult to justify through established economic arguments, the risk is greater. the risk of problems is also connected to other economic developments. if these are stable, there is a smaller probability that those who have borrowed to buy a house will have made their decision on what later proves to be the wrong grounds. an example can illustrate the latter form of reasoning. interest rates are currently at an all - time low. this indicates that they will rise, which is an assumption that most households ought to have taken into account. however, many of them may also have been counting on rising income, as this is the normal situation ; interest rates usually rise at the point when economic growth and thereby income in society increases. there is of course a risk here. a couple of decades ago we experienced a long period of both low growth and high inflation. if this should be repeated - although it does not at present appear likely - it is quite possible that many households would encounter difficulties. to sum up, one can say that the riksbank in its normal work process does take into account, as far as is possible, the effects of indebtedness and house prices on inflation via effects on, for instance, consumption and general demand. these effects are taken into consideration in our inflation forecasts. in addition, we might choose to include effects on the payment system and on general economic performance if, for instance, we saw a significant risk of a future financial crisis. the clarification of our monetary policy that we published in 1999 states that we would explain clearly the reasoning behind our decision if this situation were to arise. naturally, this question - of whether the risks are sufficiently large to require special consideration in the monetary policy decision - is not a simple one. it concerns weighing up difficult issues about which opinions may differ from time to time. so far, however, considerations with regard to the effects of house prices and household indebtedness on factors other than the inflation rate have only played a marginal role in interest rate policy. inflation and monetary policy let me conclude with a summary of my current views on inflation and monetary policy. since the early summer, inflation in sweden has developed roughly in line with the riks

benoit cœure : restoring confidence in the euro area remarks by mr benoit cœure, member of the executive board of the european central bank, at the festival dell ’ economia, trento, 1 june 2012. * * * ladies and gentlemen, i would like to thank tito boeri and lucrezia reichlin for their invitation to this sharing of views on how to restore growth in the euro area. central banks are not central to delivering long - term economic growth. long - term growth is about education, innovation and the functioning of markets, none of which is really in our hands. we can nevertheless contribute by providing stability – in particular, price stability, which is at the heart of our mandate, as well as confidence. let ’ s face it : the euro area today lacks both stability and confidence. price stability has been achieved and the ecb will strive to maintain it, but financial markets are under strains. the question being asked today by market participants no longer concerns a particular country or sector : it is whether the political commitment exists to support the euro as a project and to improve this project. the answer to this question should be clear : the euro has brought immense economic benefits to its member countries, both in northern and southern europe, and to non - participating countries such as the uk. we must unite to support the euro as a project and to decisively improve it. what does it take to restore confidence? first, governments should pursue their efforts to bring down public debt. they have exhausted their fiscal room for manoeuvre and must rebuild it so as to be resistant to future shocks. fiscal consolidation weighs down on short - term economic activity, but it is a precondition to crowd in private investment and restore long - term growth. second, we must put a halt to financial market fragmentation. the disintegration of euro area capital markets has reached a point where it puts at risk the whole european project, including the single market for goods and services. european firms can no longer finance their investments from a single pool of savings. this hampers the possibility of a sustained and high level of growth. by extending ample amounts of liquidity to euro area banks, the ecb has mitigated the retreat of private cross - border capital flows. it is not its role however to allocate financial resources across the region. resource allocation should be performed through market mechanisms, with appropriate price signals. bringing euro area capital markets together will require more than technical