in its open market operations, the ecb therefore pursued its endeavour to contribute to the smooth functioning of the euro money market. in early august, we responded to the sudden upward pressures on the overnight interest rate by lending significant amounts of liquidity through overnight fine - tuning operations. we also carried out, and later renewed, two supplementary longer - term refinancing operations in order to reduce banks ’ concerns over their longer - term funding during a period when the longer - term repo and deposit markets turned illiquid. in the main refinancing operations the ecb has allotted larger amounts of liquidity than under normal circumstances with an aim to limit the volatility of very short term rates around the ecb ’ s minimum bid rate. these large amounts of liquidity have always been absorbed later on during the maintenance period, so that the ecb has only provided banks with the liquidity needed for the fulfilment of their reserve requirements on average over the maintenance periods. let me also underline that we only provide such operations against solid collateral, as always. 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

willem f duisenberg : changing fortunes - financing world growth speech by dr willem f duisenberg, president of the european central bank, at the 2003 spruce meadows round table, calgary, 5 september 2003. * * * it is a great pleasure for me to be part of this round table discussion today and i would like to thank the organisers for inviting me to share some thoughts with you on the topic of financing world growth. since 2000, we have witnessed terrorism, war and declines in world equity markets, all of which contributed to increasing an already ongoing deterioration in confidence in most countries. now with the end of the major hostilities in iraq, the reduction in geopolitical uncertainties and lower oil prices, a gradual upturn in world economic activity is expected and it is important that policy - makers do all they can to support it. given the breadth of this topic and therefore the strong temptation to overrun on my time allocation, i will focus on just two points. first, i would like to say a few general words about the roles and, may i add, limitations of monetary and fiscal policy in reviving global demand, and the importance of microeconomic policies in this respect, in particular the role of structural reform in increasing potential growth. second, with the help of regional - specific examples, i would like to present some future challenges with respect to microeconomic policies and structural reforms in the world. monetary and fiscal policy, and structural reform the achievement and maintenance of strong growth implies a perspective that extends beyond shorter - term cyclical developments. indeed, over the medium term, economic growth tends to be negatively affected by the considerable costs associated with inflation, and the prospect of stable prices is therefore a key factor of growth. by being strictly geared towards maintaining price stability in a credible and lasting manner, monetary policy makes an important contribution to achieving a high level of output and employment, and to sustaining growth. confidence in lasting price stability removes the inflation risk premium on interest rates, ensuring low real interest rates, which in turn foster investment, growth and employment. theoretical and empirical evidence clearly confirm that there is no long - term trade off between price stability and economic growth. trying to use monetary policy to fine - tune economic activity or to gear it above a sustainable level will, in the long run, simply lead to rising inflation - not to faster economic growth. fiscal policy also plays a key role in contributing to macroeconomic stability. stable, sustainable and efficient fiscal policies exert a favourable effect on long