around 180 basis points since may 2014. by the end of 2016, the recovery was clearly firming and further broadening across sectors and countries. incoming data and sentiment indicators in the first quarter of this year suggest that the pace of growth may be gaining momentum. nevertheless, the legacy of the financial crisis still determines today ’ s economic performance in many respects. owing to a considerable amount of unutilised resources underlying inflation continues to lack a convincing upward trend. headline inflation has increased but that mostly reflects rising energy and food prices. the march flash estimate shows that headline inflation dropped to 1. 5 % from 2 % in february and that underlying inflation decreased from 0. 9 % to 0. 7 %. we had previously warned that headline inflation could decline after march - april as a result of the reduced statistical base effect of comparing this year ’ s price levels of oil and other commodities with their levels a year ago. the decrease in underlying inflation, however, was disappointing. the domestic drivers of inflation, namely wages, are not yet responding to the recovery and the narrowing output gap. according to our latest staff projections, inflation is expected to move towards 1. 7 % in 2019, but that assumes underlying inflation at 1. 8 % and wage growth at 2. 4 %. the foreseen increase in wages in the baseline scenario is thus essential for the staff projections for growth and inflation to materialise in 2019. furthermore, while near - term projected inflation has been subject to sizeable upward revisions due to energy and food price rises, the medium - term outlook remains largely unaffected. more importantly, the upward path of headline inflation over the coming years remains highly dependent on monetary policy support. against this background, it is appropriate to preserve the degree of monetary accommodation we are currently providing. ensuring a safe and growth - supporting financial system while our monetary policy is primarily geared towards maintaining price stability, the ecb is also 2 / 5 bis central bankers'speeches tasked with identifying and assessing the potential impact of systemic risks on the stability of the euro area financial system. our annual report sets out four key risks. first, the possibility of a rise in global risk premia has increased in an environment of political uncertainty and benign pricing in the markets. second, possible rising negative feedback loops between weak bank profitability, in the face of structural challenges in a low interest rate environment, and low nominal growth. third, political uncertainty which undermines reform efforts, with debt sustainability concerns resurfacing for the sovereign and

lorenzo bini smaghi : economic policies on the two sides of the atlantic – ( why ) are they different? lecture by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the collegio carlo alberto, moncalieri, 7 november 2008. * 1. * * introduction 1 the united states and the euro area are the two main economic and monetary areas in the world and they are reasonably similar in size, with a population of over 300 million ( 300 million in the united states and 320 million in the euro area ) and gdp of around €10, 000 billion at current prices ( at the going rate of exchange of around usd 1. 30 to the euro – us gdp is worth around €11, 000 billion, while euro area gdp is worth around €9, 000 billion ). the economic policies implemented in these two areas act as a reference for the whole world ’ s economy. they are carefully scrutinised and compared by academics, market players and commentators. in recent years, the two economies have been compared in a largely asymmetrical way, possibly a hangover from an obsolete institutional setup and analytical reference framework. while in the united states economic policies are mainly assessed on the basis of the us economy ’ s underlying state, in the euro area the assessment is made on the basis not only of european economic fundamentals, but also, and indeed above all, with reference to economic policy decisions made on the other side of the atlantic. on our continent, monetary and budgetary policies are often judged in relation to what is decided in the united states rather than in their own right. however, it is very rare that the opposite happens. particularly at moments such as we are experiencing right now, one often hears people asking how come monetary and budgetary policies in the euro area do not closely follow the strategies implemented in the united states, without their pausing for a moment to consider whether or not those us policies are suited to the european economy. there is still a kind of unthinking reflex in europe that prompts some people to believe that our economic policy authorities should adopt the same approach as the us authorities, and that we are making a mistake when we do not do so. this kind of asymmetrical assessment was perhaps alright under the bretton woods system, in which the european countries pegged their currencies to the dollar, and under the subsequent fluctuating system in which the individual european countries