with downside risks to inflation in the euro area having increased recently. this concern is also evident in the introductory statement of the ecb governing council last week. there is no doubt that uncertainty is currently running high. given the recent financial market turbulence in china, the continued drop in oil and commodity prices and the heightened geopolitical risks, doubts are being raised in some quarters as to whether the international environment is still providing the stimuli for euro - area growth that were incorporated into the december eurosystem staff projection, with economic growth for 2016 and 2017 expected to be 1. 7 % and 1. 9 %, respectively. however, we shouldn ’ t paint the economic outlook blacker than it actually is. the financial market turbulence in china at the start of january and its partial transfer to the rest of the world demonstrate the nervousness of the financial markets. however, the price falls in china can primarily be viewed as further corrections to earlier, sharp price rises. and they were undoubtedly also reinforced by an ill - timed regulatory measure. in my opinion, there are currently no signs of a severe economic slump in china. instead, there are indications of a gradual slowdown in economic growth. this is consistent with china ’ s transition to a more service - oriented, domestic - driven economic model. furthermore, the unusually sharp oil price drop is now weighing heavily on numerous oilproducing countries. many of these countries are on the brink of, or have already tipped over into, a recession, which is why they need to tighten the reins on public and private sector expenditure. as net importers of crude oil, germany and the euro area are receiving a boost to their economies, as petrol and heating costs are falling further and many firms are able to manufacture and produce goods more cheaply. the fall in energy prices compared with the level included in the december eurosystem staff projection will probably yield estimated savings of just over half a percentage point for consumers and enterprises this year – both in germany and in the euro area as a whole. the flip side of the oil price drop in monetary policy terms is, however, that downside risks to the inflation outlook have also increased. the inflation rate will not rise again until later than previously anticipated and there will probably need to be a substantial downward revision of the inflation forecast for this year. the fact that the eurosystem will not achieve its price stability goal over an extended period of time will undoubtedly put the credibility of monetary policy to the test. we must

##u, journal of common market studies, vol. 42, 815 - 840. expressed in logarithms and first differences, gdp growth can be decomposed into 4 ( growth of private consumptio n ) δ ln gdp = δ ln c + δ ln gdp − δ ln c ( consumpti on smoothing ) or, in more detail, δ ln gdp = δ ln c + δ ln gdp − δ ln gnp + δ ln gnp − δ ln a ( growth of private consumption ) ( smoothing by net foreign income ) ( smoothing by external saving ) ( smoothing by domestic saving ) + δ ln a − δ ln c in this disaggregation, we would expect the term δ ln gnp − δ ln a to be the main channel through which consumption smoothing by cross - border banking integration should work. in the following table, calculated for germany, the coefficients βe and βh indicate the absorption of additional gdp growth by net foreign income and external saving, respectively. 5 a positive sign stands for a positive effect on consumption smoothing. the coefficients suggest that international consumption risk sharing in germany is primarily achieved by countercyclical net foreign income, whereas external saving tends to go along with business cycles. this outcome holds for both overall consumption smoothing and consumption smoothing vis - a - vis other euro - area countries only. international consumption smoothing in germany : absorption of additional gdp growth by net foreign income ( ße ) and external saving ( ßh ) overall vis - a - vis emu βeewu βhewu - 0. 03 0. 13 - 0. 23 - 0. 17 0. 08 - 0. 16 βe βh 0. 01 0. 22 z international consumption risk sharing in germany is mainly achieved by countercyclical net foreign income z external saving tends to be procyclical 13 november 2008 comments on papers by p. lane and s. kalemli - ozcan et al. 9 of 10 where gdp = gross domestic product, gnp = gross national product, a = domestic absorption, c = private consumption. the sum of βe and βh corresponds to 1 - κ in the paper. however, the coefficients are calculated by simple ols and do not account for endogeneity and other factors like - for example - serial correlation. therefore, significance levels are not indicated and the values should be interpreted with caution.