and strengthen further in 2003. this output profile means that there will be an appreciable amount of excess supply in the economy through 2002. because of this, we see core inflation averaging just under 1 ½ per cent in the second half of 2002 — below our 2 per cent target. total cpi inflation should remain below the core rate until late 2002. with slack in the economy starting to be taken up in the second half of 2002, and expected to disappear by late 2003, inflation should move back up close to 2 per cent in about two years. i would now like to reiterate some of the comments i made on current developments last week, when we released our update to the november monetary policy report, and in two speeches i gave in western canada earlier this week. it is now becoming clearer that the canadian economy will strengthen as we go through this year and into 2003. recent data increasingly support the view that a recovery is taking hold. household spending in canada, particularly on interest - sensitive purchases, has been stronger than expected. the latest data on exports and manufacturing activity show signs of recovery. the inventory adjustment is progressing. and with early evidence of a revival in the u. s. economy, the world prices of non - energy commodities appear to have bottomed out. these signs of a pickup in economic activity in canada, and elsewhere, are encouraging. over time, exchange rates should reflect economic and financial developments and prospects. but movements in the canada – u. s. exchange rate do not yet appear to have reflected the recent developments in our economy. and to the extent that the recent depreciation of the canadian dollar risks affecting consumer and business confidence in canada, it is clearly not helpful for our economy. furthermore, at this juncture, it is certainly the case that the economic recovery in canada does not hinge on the current low levels of the canadian dollar against its u. s. counterpart. let me sum up. there is a good chance that when the final national accounts data for canada come out, we will see positive, albeit modest, economic growth in both the last quarter of 2001 and the first quarter of this year. at this point, all available data suggest that final demand in the fourth quarter was stronger than we had anticipated. with production coming in at a much lower rate than final demand, the implication is that there has been a sharp rundown of inventories during the fourth quarter. this bodes well for the future, since it underpins the significant

by gradually moving towards banking and the fiscal union. europe took its first big step towards banking union in december 2012, as eu finance ministers agreed to make the ecb the common bank supervisor. the eu has also tried to make fiscal rules more stringent. in this regard, the treaty on stability, coordination and governance known as “ fiscal compact ”, has come into force in january 2013. this is an intergovernmental treaty which establishes that member states must enact laws, preferably at constitutional level, requiring their national budgets to be in balance or in surplus within the treaty's definition. the laws must also contain a selfcorrecting mechanism to prevent any breach. the treaty defines a balanced budget as a general budget deficit of less than 3. 0 per cent of gdp, and a structural deficit of less than 1. 0 per cent of gdp if the debt level is below 60 per cent. if the debt level is above 60 per cent of gdp, the structural deficit norm is more stringent at below 0. 5 per cent of gdp. the “ two - pack ” regulations subject euro area countries to the obligation of ex ante notification of budgetary plans to the european commission ( ec ). should countries be subject to an bis central bankers ’ speeches excessive deficit procedure ( edp ) or be involved in a financial assistance program by the esm, they will also be subject to an enhanced monitoring by the ec ( praet, 2013 ) 3. the ecb has taken a number of policy measures ranging from lowering the policy interest rate, substantial bond buying and provision of concessional loans to banks. the ecb launched its long term refinancing operations ( ltro ) which made available three - year loans to banks : 523 banks borrowed €489 billion in december 2011 and 800 banks borrowed € 530 billion in february 2012. the ecb launched outright monetary transactions ( omt ) in september 2012 to make discretionary purchases of short - term sovereign bonds with a prior request by the concerned sovereigns for international assistance via the efsf / esm. the imf contributed to emergency lending and has elaborated and monitored the economic adjustments programs for greece, ireland and portugal in close cooperation with the ec and the ecb known as the ‘ troika ’. even though the major share of the financial support has come from euro - zone countries, the scale of the imf ’ s lending has been substantial. since the size of the rescue packages has been huge