in early 2004 when germany, france and italy in particular asked us to do so. we did not hesitate to raise interest rates in december 2005. at that time, ten governments in the euro area out of 12 and many international observers asked the ecb to leave its key rates unchanged. international financial institutions, in particular, highlighted the risks that the tightening of monetary policy – after a prolonged period of accommodative monetary policy – could pose to the recovery. despite these warnings, we conducted our monetary tightening, and international financial institutions have agreed that we were right to make that decision. after the crisis escalated in mid - september 2008, while inflationary pressures subsided, we decided, in full accordance with our mandate, to reduce our key interest rate. we cut it rapidly, from 4. 25 % in october 2008 to 1 % in may 2009. we lowered the key interest rate at a pace and a level unprecedented in the recent history of the euro area countries. with the benefit of hindsight, the decisions we took during the crisis were effective. they have in particular helped to preserve a very solid anchoring of inflation expectations over the past four years. our determination to maintain price stability over the medium term has enabled us to prevent both the risk of inflation and of deflation from materialising. with the recovery now more firmly established, we have seen in recent months upside risks to the outlook for price stability over the medium term. again, the sharp increase in oil and other commodities has had a major impact on overall inflation. in these circumstances, the central bank must prevent increases in the prices of raw materials from being incorporated bis central bankers ’ speeches into the long - term inflation expectations, which could trigger second - round effects on wages and prices. it is against this background that the governing council decided in april to raise interest rates. i stressed in reporting this decision it had been taken unanimously. the action of the governing council is motivated by a common goal. that decision in april confirmed that the separation principle is strictly applied and that our non - conventional measures do not restrict in any way our ability to toughen the monetary policy stance when facing inflationary pressures. thus, when the governing council decided in march and april that it was time to raise interest rates, in parallel, at the same time, it decided to keep, in the second quarter, the provision of unlimited fixed - rate liquidity for a period of three months. let me remind you of what i said earlier : nothing of what i

have just said can or should be interpreted in terms of future decisions of the governing council next thursday. ii. the economic and financial reforms brought about by the crisis the tensions we face in europe today are not a crisis of the euro. they do not indicate a crisis in the monetary union. the single currency has kept its promise to provide price stability in the euro area. the current crisis stems rather from insufficient monitoring of economic policies in some member states. today, it ’ s not the monetary pillar of economic and monetary union that is at stake, but the economic pillar. if we refer to the acronym of that union, emu, we can say that the concerns relate to the “ e ” rather than “ m ” in the emu. in the rest of my remarks i ’ ll consider what is being done now in europe to strengthen the economic pillar of emu. the main cause of the crisis has been the negligence of financial risk. it has necessitated the implementation of a programme of comprehensive reforms for virtually every aspect of the global financial system. we have to control the forces that led the system to think only about itself and put an end to this situation so that the system serves the real economy. and we have to ensure that the financial system contributes to sustainable economic growth. at this point, we have drawn up a set of more stringent banking regulations, providing capital to absorb more losses, improving coverage and reducing the risk of excessive borrowing. the countercyclical capital buffers are designed to reduce pro - cyclicality. the supervision of financial institutions, financial markets and market infrastructure is increasing, while the organisational structure of financial oversight is being overhauled. but much remains to be done. the most important aspect concerns the implementation of these reforms. in addition, the issue of financial institutions of systemic importance still has to be settled, and should strengthen the oversight of financial markets. we cannot allow ourselves to suffer from a lack of transparency and the excessive influence of dominant players and oligopolistic market structures. the new european system of financial supervision ( esfs ) represents an important step forward. the three new authorities created for the european banking sector, insurance and occupational pensions, and capital markets allow closer monitoring of the interrelationships and impact of contagion in the financial system of the european union. finally, the european systemic risk board ( esrb ) is developing the tools necessary to warn and, if appropriate, make recommendations on measures to cope with potential sources of systemic risk.