23  Services liberalisation is also a more efficient form of rebalancing because services industries tend to have higher domestic value added, and jobs, than manufactured goods. The lower import content of services compared with goods means smaller changes are needed to address current account imbalances. 24  For  example, a £ billion increase in UK financial services exports would reduce the UK’s trade deficit by £ billion, whereas the same increase in exports of autos would contribute £ billion. Of course, liberalising services is not straightforward, as barriers are typically not tariffs but ‘behind the border’ differences in regulatory standards and trading conditions. This is where global standards and regulatory cooperation should help. 23  Roughly equal to 15%. These calculations are based on the estimated effects of reducing services trade restrictions on services exports reported in Nordås, H.K. and Rouzet, D (2016), ‘The impact of services trade restrictiveness on trade flows’, The World Economy, and the estimated mapping between services trade restrictions and services trade costs reported in Miroudot, S. and Shepherd, B (2016) ibid. 24 In sterling terms. In percentage terms, the changes are larger for services reflecting the fact that they start from a smaller base. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Arguably the greatest possibilities are in financial services given the major progress in financial reform. Indeed, financial services could serve as a template for broader services trade liberalisation. And with Brexit, we have the coincidence of necessity and opportunity.

Just before Christmas we lengthened the maturity of the second last main refinancing operation from one to two weeks, thus facilitating the coverage of the year-end liquidity needs of banks. For this specific operation, we announced that we would satisfy all bids received at 4.21 percent or above, the 4.21 percent level being the weighted average rate of the previous main refinancing operation one week before. This action, combined with our liquidity-absorbing operations until 4 January, contributed to a smooth end of the year in the euro area by keeping short-term interest rates close to the ECB’s minimum bid rate. Overall, the ECB’s actions permitted to maintain very short-term rates close to the ECB’s policy rate. The tensions, which have been observed in the longer term money market rates in euro, are due in particular to the persistence of uncertainties surrounding the financial health and liquidity needs of financial institutions as well as the impact of the ongoing global financial market correction, with a general re-appreciation of risks. These tensions have receded whilst remaining significant. By reducing the volatility of the very short-term rates around the key policy rate of the ECB and by containing pressures in the interbank term money market, the ECB’s liquidity operations have contributed to a better resilience of the European financial system without – of course – eliminating the causes of the tensions, originating outside the money market. During this tumultuous period, the Eurosystem remained, as usual, in close contact with other major central banks.