Many countries, especially in advanced economies have spent substantial amount of public funds to boost aggregate demand and to revitalize the financial system. Most of these countries have no fiscal resources left to put forward a similar stimulus package, if the world economy experiences another setback. Therefore it is of utmost importance to keep the recovery intact, which is already too fragile. Debt sustainability and fiscal imbalances stand out as the main challenges for many years to come. As the recent developments in the financial markets revealed, deterioration of sovereign creditworthiness can hamper macroeconomic and financial stability. Therefore, ongoing problems especially in some advanced economies, particularly in Europe should be resolved in a quick, effective and credible manner. However, we should also keep in mind that supporting global demand is a global responsibility. It is questionable whether emerging market economies would be able to fulfill the gap in global demand, while advanced countries stay on the sideline to clean up their balance sheets. Neither their share on global economy nor their economic and financial structure would be adequate to play that role. Especially emerging economies that are in deficit, still being in convergence stage, need to raise their production capacity to pay off their external debt accumulated during their catch-up. Therefore, I strongly believe that a holistic approach is a must. While developing any kind of policies, including fiscal tightening or restructuring, one should pay great attention to negative externalities these policies may cause on other economies. In particular, we should avoid beggar-thy-neighbor type of policies.

Each time, we gave visibility over the next twelve months; and we stuck to the provisional indicative timetable that we set without extending the time limits. I turn now to flexibility. Our sequence is clear but the details of implementation are flexible and state-dependent. We have included several options, such as the precise timing of the first increase in interest rates and the path of policy rates thereafter, or the pace of our reinvestments. There is much speculation for instance on the future trajectory of our interest rates; but at this stage, I don’t see any value in trading off our flexibility tomorrow against more clarity today. Beyond that, as Mario Draghi mentioned today, the question of TLTROs will need to be considered. In the face of uncertainty, one often hears reference to the celebrated Brainard 1 ‘conservatism principle’ (as reinterpreted by Alan Blinder 2. This is not, as the impression is sometimes given, a general warning to move cautiously when the world is uncertain. The Brainard ‘conservatism principle’ says only that you should move cautiously if you are uncertain about the effect of your policy instrument on your objective. But we should go beyond a static view of Brainard’s principle (which focuses on one single small step): a dynamic view would include the time dimension and consider how to manage and communicate a sequence of incremental steps. 2. How can we collectively respond to global tensions? There are increasing tensions in the global environment, starting with protectionism.