. and monetary policy cannot and should not discourage the ambitious reform efforts that are necessary to achieve such rebalancing. but if average inflation is allowed to drift too low at the euro area level, it is much harder for those countries to undershoot the average. and in the process, adjustment runs into major headwinds as demand suffers and real debt burdens rise. addressing the concerns i am of course aware that our rate cut has raised some concerns. one concern is the effect of this decision on different countries in the euro area. however, it is important to understand that setting monetary policy for a union of 17 member states is not the same as for a single country. what is the same is the objective – price stability. but what is different is the institutional setting, the decision - making procedures and the instruments for the implementation of monetary policy. and crucially, in monetary union price stability is defined for the euro area as a whole. this is the mandate that was given to us by the euro area member states and, since the launch of the euro, we have delivered it continuously and in full. euro area price stability is confirmed and anchored into the future. bis central bankers ’ speeches another concern is the implication of low interest rates for savers. this concern is understandable. but the effect of monetary policy on the returns on savings cannot be seen in isolation. first, we need to take account of the state of the economy. interest rates are low because the economy is weak. accommodative monetary policy is a response to this, designed to restore sustainable growth in an environment of price stability. if we were to raise rates in this situation, it would only depress the economy further. and this would in turn affect savings. why? because people would lose their jobs or have their wages cut in a prolonged and entrenched recession, thus reducing the amount they can save. or because they would see returns on assets fall, thus reducing their investment income. when the economy contracts, incomes fall, and savings necessarily fall in tandem. moreover, the interest rate that matters most to long - term savers is not the main ecb refinancing rate, but the rate on safe long - term investments – in germany, that is long - term bunds. the ecb ’ s decisions influence these long - term rates but there are also other factors at play. for example, on the day of our rate cut of 25 basis points, interest rates on

10 - year bunds fell by less than 7 basis points. since then those rates have risen by about 2 basis points. the current low level of interest rates on long - term bunds is largely explained by investors that have sought safe assets in the context of sovereign debt tensions in the euro area. a third concern about low interest rates is that they undermine incentives for reform in the euro area. it is true that monetary policy decisions can have side effects – i mentioned a positive side effect earlier. yet we act for the euro area as a whole in line with our mandate, not for individual countries. if there is concern about reform incentives, we need to ask whether the framework of economic governance is being sufficiently enforced, and if not, what could be done to strengthen it. after all, ensuring sound fiscal and economic policies is ultimately the task of political authorities, not monetary authorities. economic policy in the same vein, we know that monetary policy alone cannot create a sustainable recovery. restarting growth ultimately depends on governments, business leaders and social partners working together. governments need to create the conditions that allow entrepreneurs to generate growth. there is no short cut to growth through debt. growth ultimately has to come from increasing the productive capacity of the economy – that is, through raising competitiveness and productivity. this country presents a good example of how to build solid foundations for growth. germany has competitive and innovative firms that are embedded in global value chains, notably the mittelstand. the country has enacted labour market reforms that have helped maintain price competitiveness, and that limit the impact of economic downturns on the young. and it has done this while working in cooperation with social partners, who understand that business models have to adapt to a globalised economy. in short, germany has oriented itself in a direction that in my view would benefit all euro area countries : being forward - looking, open to the world and focused on competitiveness and productivity. bis central bankers ’ speeches abraham lincoln famously said that “ you cannot make the weak stronger by making the strong weaker ”. similarly, the answer to the problems of the euro area is not to weaken its stronger economies. rather, it is to strengthen its weaker economies. and in fact, this is what we are seeing in the euro area today. most countries that lost competitiveness are regaining it. they are converging towards the most competitive countries, not vice versa. they have learned the fundamental lesson – for which germany is the model – that in a monetary union