In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue strengthening the resilience of banks where needed. The soundness of banks' balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalization of all funding channels. Decisive steps for establishing an integrated financial framework will help to accomplish this objective. A single supervisory mechanism (SSM) is one of the main building blocks. It is a crucial move toward re-integrating the banking system.
To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.
Further economic policy measures and progress in the reform of European governance should help to support financial market sentiment and improve the outlook for economic growth. In this context, the Governing Council looks forward to the roadmap toward genuine Economic and Monetary Union to be decided at the European Council meeting on 13-14 December 2012. Initiatives to accelerate structural reforms that help restore competitiveness are particularly important to revive the growth potential of euro area countries and to increase employment. More generally, all euro area countries must ensure that their product and labor markets possess the adjustment capacity required for their smooth and effective functioning within a monetary union. Finally, continued fiscal consolidation is expected to restore sound fiscal positions, in line with the commitments under the Stability and Growth Pact and the 2012 European Semester recommendations. Significant progress has already been made in reducing domestic and external imbalances and in improving competitiveness. Continued policy actions on the European, structural and fiscal reform fronts should be mutually reinforcing and send a strong signal to markets.
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