growth in the euro area, which slowed in the second quarter of 2011 to 0. 2 % quarter on quarter, is expected to be very moderate in the second half of this year. there are signs that previously identified downside risks have been materialising, as reflected in unfavourable evidence from survey data. looking forward, a number of factors seem to be dampening the underlying growth momentum in the euro area, including a moderation in the pace of global demand and unfavourable effects on overall financing conditions and on confidence resulting from ongoing tensions in a number of euro area sovereign debt markets. at the same time, we continue to expect euro area economic activity to benefit from continued positive economic growth in the emerging market economies, as well as from the low short - term interest rates and the various measures taken to support the functioning of the financial sector. in the governing council ’ s assessment, the downside risks to the economic outlook for the euro area are confirmed in an environment of particularly high uncertainty. downside risks notably relate to a further intensification of the tensions in some segments of the financial markets in the euro area and at the global level, as well as to the potential for these pressures to further spill over into the euro area real economy. they also relate to the impact bis central bankers ’ speeches of the still high energy prices, protectionist pressures and the possibility of a disorderly correction of global imbalances. with regard to price developments, euro area annual hicp inflation was 3. 0 % in october according to eurostat ’ s flash estimate, unchanged from september. inflation rates have been at elevated levels since the end of last year, mainly driven by higher energy and other commodity prices. looking ahead, they are likely to stay above 2 % for some months to come, before falling below 2 % in the course of 2012. inflation rates are expected to remain in line with price stability over the policy - relevant horizon. this pattern reflects the expectation that, in an environment of weaker euro area and global growth, price, cost and wage pressures in the euro area should also moderate. the governing council continues to view the risks to the medium - term outlook for price developments as broadly balanced, taking also into account today ’ s decision. on the upside, the main risks relate to the possibility of increases in indirect taxes and administered prices, owing to the need for fiscal consolidation in the coming years. in the current environment, however, inflationary pressure should abate. the main

##marks, to the 30 - year segment - the future euro area market interest rates became aligned with the lowest market rates available denominated in the most credible currencies. on 4 january 1999, the first working day after the euro ’ s launch, europe ’ s financial markets showed that the transition to the euro had been an ostensible success. the letter and the spirit of the maastricht treaty had been fully vindicated, along with the promise made to europe ’ s people and its impact on the financial markets. the euro area ’ s 300 million inhabitants benefited immediately from the best yield curve, possible financial environment. the conditions for success no doubt, a great deal of the success had a solid foundation. on the one hand, national governments were solemnly committed to respecting a number of clear and transparent convergence criteria before they could qualify to adopt the euro. these criteria ensured a level of quality in the management of public finances and - more broadly speaking - a fair pace of economic and monetary convergence among the economies that were to unify into a single currency area. on the other hand, the treaty which had established the european community had laid down in stone the fact that monetary policy would be conducted with the aim of maintaining price stability and that the new central bank would be fully independent. these provisions were designed to ensure the long - lasting credibility of the euro. i will now try to expand on these institutional requirements more analytically. price stability objective for monetary policy first, the treaty establishing the european union assigned the ecb the primary objective of maintaining price stability. it was particularly important that this key objective was clear and unambiguous, since for the national central banks with the most credible currencies and lowest market interest rates, price stability was enshrined by national law as their own primary objective. in any case, far from being a novel aspect of the european institutional system, as it is sometimes claimed, price stability is defined as central banks ’ primary responsibility in almost all industrialised, emerging and transition economies, with a particular emphasis being attributed to this notion in all economies that have adopted “ direct inflation targeting ”. i recognize that the united states has chosen to present its objective of monetary policy in a different format. but, as i will argue in a while, i do not believe that the us approach differs fundamentally from the concept we have adopted. central bank independence second, the treaty made the ecb fully independent. economic research has shown that central bank ’ s independence