income and thus consumption. in addition, external as well as domestic demand should increasingly benefit from the effects of the significant macroeconomic stimulus under way as well as from measures taken to restore the functioning of the financial system both inside and outside the euro area. taking these effects into account, we see the risks to this outlook for economic activity as being broadly balanced. on the one hand, there may be stronger than anticipated positive effects due to the decrease in commodity prices and to policy measures taken. on the other hand, there are concerns that the turmoil in financial markets could have a stronger impact on the real economy, as well as that protectionist pressures could intensify and that there could be adverse developments in the world economy stemming from a disorderly correction of global imbalances. annual hicp inflation has fallen further, from 1. 2 % in february to 0. 6 % in march, according to eurostat's flash estimate. as explained on earlier occasions, the decline in inflation since last summer primarily reflects the sharp fall in global commodity prices over this period. moreover, signs of a more broad - based reduction in inflationary pressure are increasingly emerging. looking ahead, base effects stemming from past energy price effects will play a significant role in the shorter - term dynamics of the hicp. accordingly, we expect to see headline annual inflation rates declining further in the coming months and temporarily reaching negative levels around mid - year. thereafter, annual inflation rates should increase again. such short - term movements are, however, not relevant from a monetary policy perspective. looking further ahead, over the policy - relevant horizon, annual hicp inflation is expected to remain below 2 % in 2010, reflecting mainly ongoing sluggish demand in the euro area and elsewhere. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council's aim of keeping inflation rates at levels below, but close to, 2 % over the medium term. the risks surrounding this outlook are broadly balanced. they relate in particular to the risks to the outlook for economic activity as well as to risks to commodity prices. turning to the monetary analysis, the latest data confirm the high month - to - month volatility of developments in m3 and its components observed since the intensification of the financial turmoil in september 2008. looking through this volatility, the pace of monetary expansion in the euro area has continued to decelerate markedly and supports the assessment of diminishing risks to price stability in the

important step in promoting the diffusion of technology, and are rightly a recurrent theme of this conference. research has revealed a number of factors that can inhibit competitiveness and impede investment decisions. 9 beyond cyclical and financial factors, such as weak demand, uncertainty and excessive corporate debt levels, 10 structural factors, such as weak economic institutions and rigid product and labour markets, can also play a negative role. to encourage the effective diffusion of technology, structural and macro conditions favouring the market entry and expansion of productive firms, as well as the exit of persistently unproductive firms, need to be in place. to ensure a level playing field for firms in the area of new technology, policies are also needed to settle issues of ownership, tax treatment, property rights, competition and product regulation associated with intellectual assets. reforming insolvency regimes would break the vicious circle of weak banks and zombie firms having an adverse impact on productivity. 11 investment finance that brings me to my last point. the widespread diffusion of technology requires financing that is conducive to innovation and growth. monetary policy has played a key role since the financial crisis by helping to lower financing costs and increase access to finance. it will continue to 2 / 4 bis central bankers'speeches maintain favourable liquidity conditions and an ample degree of monetary accommodation. but what matters most in the long term is deep and integrated financial markets. equity funding, in particular, is becoming increasingly important, as confirmed by the positive impact of deeper stock markets on growth in high - tech and patent - intensive industries. 12 investment in new technology and intangible assets seems to be more reliant on firms ’ internal funding. 13 this appears to be related to the characteristics of intangible investment, 14 such as the low market value and the sunk cost nature of production, making it harder to use as collateral for external funding. so completing the capital markets union is of paramount importance. we also need more ambitious policies aimed at increasing the supply of private equity, and especially of early - stage venture capital. 15 the development of fintech has the potential to expand access to credit and other financial services, in particular for small businesses. 16 more broadly, to ensure an attractive investment environment in the euro area we should seek to complete the banking union, ensure adherence to fiscal rules and fully implement structural reforms. conclusion let me conclude. boosting productivity growth and ensuring the wide diffusion of technology is crucial to achieving a long - term increase in living standards in