the single resolution mechanism decided that these two banks did not deserve to be resolved, which according to european law means rescuing some part of the banks, and that the banks should go into liquidation. but going into liquidation means that state aid rules apply, so any public money then requires two things. it requires that shareholders and subordinated debt - holders participate in the costs, which is the case in the two banks, because they go to the entity with the bad assets … but not senior bond holders? constancio : no, but the point – if the solution, for instance, under brrd, had been applying 2 / 3 bis central bankers'speeches precautionary recapitalisation in that case also senior bond holders would not have been bailed in. so it ’ s not much difference from a situation of precautionary recap, which is foreseen in the law. it ’ s not an exception. it ’ s not a special privilege. everything was decided according to the two laws that apply in these cases, with, in the case of the brrd, the potential exception of precautionary recap, which is in the law, and state aid rules. this was applied. at the same time, as a result of state aid rules, and logic, policy, the overall capacity of the banking sector in italy went down. so there was downsizing ; there was restructuring. indeed, everything was applied according to european legislation. is that just the beginning now for the italian banking sector? as we all know, it has a huge slab of npls. can we be prepared for more of these kind of … constancio : i don ’ t anticipate anything of that sort. there is the situation which was announced also during these days that is about to be concluded regarding monte dei paschi di siena, but that has been discussed with the european authorities, and very likely it will have, as was stated in the past few days, a solution very soon for that case. 3 / 3 bis central bankers'speeches

vitor constancio : interview with cnbc interview with mr vitor constancio, vice - president of the european central bank, and cnbc, conducted by ms annette weisbach in sintra on 27 june, published 28 june 2017. * * * mr constancio, we ’ re talking about a lot of economic issues here in sintra : the output gap, productivity, but also innovation. what does that all mean for your monetary policy? constancio : beyond the point that these are important subjects for any economy looking ahead, it ’ s also important for monetary policy because this concept of output gap dimension – which is the difference between where output is at the moment compared with the potential output as it could be – this is a very important concept for monetary policy decisions, because what we want when we want to, say, bring inflation closer to 2 %, is for aggregate demand to put pressure on supply in order for prices to go up. and when the difference between the actual output and the potential is negative, as is the case, then we have to close that difference. that difference depends on the way we see and calculate the potential, which is a very difficult issue in economics, and there are all sorts of different estimates, but what it means is that all central banks have to analyse very carefully and take a view on what is the degree of slack in the economy, because that ’ s crucial for the stance of monetary policy being more expansionary, less expansionary : it depends on that. so all this discussion about potential growth, productivity going forward, all that is important to see where this slack in our economies is going, and to take, then, monetary policy decisions. slack in the economy seems to be the buzzword also here in sintra. listening to the president ’ s speech, of course slack is super - important to determine whether we can look through a period of low inflation, so where do we stand here now? can we look through it, or is it still worrisome, where we stand when it comes to inflation? constancio : it ’ s very difficult for any central bank to have a very firm view on the slack. all central banks struggle to interpret where exactly is the situation, and in central banks we use many variables to try to gauge what is this slack, this difference that is in the economy. what we can say now is that what we observe is that domestic factors of inflation, starting with wage