retained earnings or by extra provisions, and we calculated the provisions that are above what would have been the normal trend of evolution of provisions because indeed, as you well know, since last year banks have been increasing provisions just preparing for the exercise and the two things together amount to €44 billion. and then the other measures, asset sales and others, amount to €67 billion. this is a measure of the front - loading by the banks in preparing for the exercise, which is important to highlight because capital increases or increases in extra provisions done last year indeed reduced the numbers that the exercise could detect in the end. bis central bankers ’ speeches the stress test itself, it ’ s also important to highlight that the severity of the scenario in the adverse case was indeed higher than in previous exercises. in fact, if we compare with previous exercises, taking the metric of the gdp drop in the adverse scenario, after two years in this present exercise the gdp on average would drop by 5. 1 %, whereas in previous exercises it dropped by 3 % or 4 % only. and this exercise had a third year which was not present in the previous exercises, so that the overall drop in gdp in the adverse scenario over the three years comes to 6. 6 %. so indeed the whole stress test was more severe also because of other shocks that were considered in the adverse scenario. just as an example, in what regards the shock in interest rates that the exercise assumes, we had an increase of the yields of sovereign bonds, which in the first year on average was 152, and the second year another 112, and in the third year also 112. you have then the distribution by country in this slide, and what is above the zero is the shock that we imposed in the scenario, an aggravation of the yields of sovereign bonds. and then below zero you have what happened since last year. and what happened? it was, as you know, exactly the opposite that the yields dropped a lot and so the prices of sovereign bonds increased on average by 12 %. so this is just another indication of the severity of the exercise in confrontation with what has happened in reality since last year. finally just to give you an idea about the drivers that command the impact of the stress test itself alone, of course the first three rows in this table show the increase in revenues, which is normal during the three years, and then the costs that were affecting the profit and loss accounts of the banks, and finally the impact on

causes of such differentials. monitoring national and sectoral developments is key to understanding the underlying trends in the euro area as a whole with a view to formulating the most appropriate monetary policy response. consequently, the ecb regularly reviews and analyses all relevant information relating to the various sectors and countries of the euro area. in this respect, particular attention must be given by responsible authorities to the evolution of competitiveness indicators, in particular of unit labour costs in the various national economies. these indicators are key in a single currency area where realignments are excluded by definition. the ecb ’ s quantitative definition of price stability, its high degree of credibility and its focus on the achievement of its primary objective have enabled it to control inflation and to anchor inflation expectations in the euro area at a very low level in all countries of the euro area. this has resulted in low interest rates and extremely favourable financing conditions to the benefit of all euro area economies. moreover, by anchoring inflation expectations and increasing transparency, monetary policy contributes to the adjustment of relative prices and facilitates the role of such prices in guiding the allocation of resources across countries and sectors. this is the best contribution that monetary policy can make to economic welfare and the achievement of high levels of activity and employment in our economies. fiscal policies and the stability and growth pact let me now turn to fiscal policies. while a few countries succeed in maintaining sound budgetary positions, developments in many euro area member states remain disappointing. unless additional measures are taken, it is looking increasingly unlikely that those countries will reduce their deficits this year below the reference value of 3 % of gdp or prevent them from exceeding that level. in the meantime, the indebtedness of euro area governments as a percentage of gdp has again increased. it is therefore essential that consolidation be given the highest priority in the countries concerned and that the reformed stability and growth pact be implemented in a strict and timely manner to ensure a rapid return to sound budgetary positions. this is primarily in the interests of the countries themselves, especially in view of the increasing pressure being placed on government budgets by ageing populations. lisbon strategy i would also like to take this opportunity to stress again the need to implement structural reforms in europe. these reforms should be aimed at realising a more dynamic and competitive economy with flexible labour, product and financial markets, allowing for a more rapid adjustment of production factors to a constantly changing environment. we are faced with the unavoidable challenges arising from an ongoing deepening in the global division