using harmonized payment products to the overall speed of the integration process. smes ’ financing conditions under stress let me start, first, with how smes have weathered the crisis and would therefore like to take a closer look at smes ’ financing conditions. the resilience of our economy in the period of the financial crisis is crucially dependent on the ability of smes to appropriately provide for their financial needs. unfortunately, very few quantitative statistics are available. therefore, i am happy that direct evidence regarding smes ’ access to finance is now available from a new, large - scale survey implemented jointly by the ecb and the european commission, the first wave of which was conducted in july this year. when asked what type of external financing they would prefer to use in order to fund growth opportunities, 70 % of smes replied that they would apply for a bank loan. hence, the financing conditions of smes are closely linked to the situation of the banking sector, i. e. the lending rates and the availability of credit. for us at the ecb, this aspect of the smes ’ financing structure is absolutely crucial for our assessment of the monetary policy stance and the transmission of our monetary policy decisions to the economy at large. during the crisis, securing financing has proven difficult for many smes and a source of serious concern for monetary policy. let me take this opportunity to stress that the decisions taken by the governing council of the ecb in terms of monetary policy and the support of the banking system via our refinancing operations have been instrumental in preventing the risk of credit drying up completely. nonetheless, it is clear that smes have experienced a severe deterioration in their economic environment over recent quarters and have seen their access to finance significantly constrained. smes have been widely affected by sluggish demand and a slump in export markets. at the same time, they have also been affected in their role as suppliers, sub - contractors and service providers to large firms which themselves were struggling with economic difficulties. according to the survey evidence, smes experienced a significant deterioration in their turnover and profits in the first half of 2009, and they were more adversely affected by the crisis than large companies. indeed, a higher net share of smes than of large firms indicated that their capital base had deteriorated. of course, the economic uncertainty and unfavourable outlook was anything but conducive to an increase in firms ’ demand for loans. at the same time, the deteriorating situation of

luis de guindos : the euro area economy and our monetary policy stance remarks by mr luis de guindos, vice - president of the european central bank, at the business leadership forum, organised by ie university, madrid, 30 october 2023. * * * recent economic developments the euro area economy remains weak. 1 foreign demand is subdued and tighter financing conditions are increasingly weighing on investment and consumer spending. the services sector is also losing steam, with weaker industrial activity spilling over to other sectors, and the impact of higher interest rates is broadening. recent indicators point to continued weakness in the near term. the labour market has been a bright spot supporting the euro area economy and has, so far, remained resilient to the slowdown in growth. but there are signs that it is turning. while unemployment stood at 6. 4 % in august, the lowest level recorded since the start of the euro, fewer new jobs are being created, including in services, which suggests that the cooling of the economy is gradually feeding through to employment. moreover, the risks to the growth outlook are tilted to the downside. growth could be lower if the effects of monetary policy transmission turn out stronger than expected, or if the world economy weakens further. furthermore, major geopolitical risks have intensified and are clouding the outlook. this may result in firms and households becoming less confident and more uncertain about the future, and dampen growth further. at the same time, while remaining significantly above our medium - term target of 2 %, recent inflation data have been in line with our expectations, confirming that our monetary policy is working. inflation dropped sharply to 4. 3 % in september and the fall was visible in all its major components. food price inflation decreased again, but – at 8. 8 % – remains high by historical standards. energy prices fell by 4. 6 %, but have risen again more recently, and have become less predictable in view of the new geopolitical tensions. inflation excluding energy and food also dropped to 4. 5 % in september, and we see continued declines in measures of underlying inflation. however, domestic inflation remains strong owing to the growing importance of wage pressures. the inflation outlook remains surrounded by significant uncertainty. in particular, heightened geopolitical tensions could drive up energy prices and higher than anticipated increases in wages could drive inflation higher. by contrast, a stronger transmission of monetary policy or a worsening of the global economic environment would ease price pressures. longer - term interest