liquidity ; intervening in bond markets that were malfunctioning, like the sovereign bond market or the covered bond market ; and launching two three - year long - term refinancing operations ( ltros ), which injected more than 1 trillion euro into the euro area banking system. overall, our balance sheet increased from just below 1. 5 trillion euro before the crisis to more than 3 trillion euro at its peak. bis central bankers ’ speeches our measures are primarily focused on banks because, in the euro area, bank lending is the main channel through which firms and households get access to finance. around three quarters of firms ’ external financing comes from banks, compared with only around one quarter in the united states. supporting the banking system is therefore essential to support growth in the euro area – and to fulfil our mandate to maintain price stability. more recently, the ecb has acted to remove unfounded fears about the future integrity of our monetary union. these fears were creating severe turbulence in financial markets and preventing our low interest rates from reaching the countries where they were needed most. as a result, we saw a risk of a widespread credit crunch in these countries. questions over fiscal sustainability and growing market distrust were starting to spill over into their respective banking sectors. the effects for growth and employment would have been severe. indeed, investors were suddenly losing confidence that the euro area could survive in its current composition. the prospect that claims on governments and private companies in certain countries could not be discharged in euros had become a possibility. our response was to introduce the programme of outright monetary transactions ( omt ), which allows for ex ante unlimited interventions in sovereign debt markets. omt has been effective in restoring market functioning and trust in the euro area. for example, since the omt announcement, bond markets have steadied, providing discipline without becoming destructive. spreads on long - term bonds for spain, italy and ireland have declined by around 150 – 250 basis points, and for portugal by almost 500 basis points. and this has helped reduce financial fragmentation within the euro area, as shown by the best indicator we have for fragmentation, the level of target balances. these have declined by 285 billion euros, or 25 %, since the peak last year. france, like all other member states, has benefited significantly from this stabilisation. in short, the ecb has been very active in responding to the crisis. we have robustly defended the stability of our monetary union and therefore of our money

low is also contrary to price stability as it can create a self - fulfilling spiral of expectations that prices will continue falling. that would discourage households from consuming and companies would stop investing. this is the definition of deflation. so we want to be in the safe area between high inflation and deflation, and below but close to 2 % is exactly the right level. note that since 1998, when this number was chosen, most of the major central banks around the world have converged towards the same number : it has been adopted by the us federal reserve, the bank of england and most recently by the bank of japan. in short, 2 % inflation is some sort of a lubricant for the economy. such steadily increasing prices do not distort economic choices. my personal definition of price stability is a rate of inflation which does not distort economic behaviour. to come back to slovenian issues : our authorities have taken the decision to avoid using the esm funds, which also carry certain conditionality. based on the philosophy that we will solve our problems by ourselves, we have also tried to sell bonds in the us market. what is your view of that? would it be better for slovenia to return to the bis central bankers ’ speeches euro market and issue euro - denominated bonds? after all, we are a euro area country … i don ’ t have any advice to give to your finance minister. he certainly does what is in the best interest of slovenian taxpayers. in the medium term, stable funding for the slovenian budget would benefit from a mix of dollar issuance and euro issuance. but so far the funding strategy has been successful. the biggest opposition party in slovenia has proposed changes in central bank legislation to allow a representative of the political opposition to attend sessions of the governing board of banka slovenije. is this proposal in line with ecb policies? we are in the process of looking at that particular proposal but it is clear that in every euro area country, small or large, the independence of the national central bank has to be ensured. according to one estimate, the 128 largest european banks which will undergo the asset quality review and stress test this year will require up to €500 billion of additional capital. is this a manageable amount? it is absolutely premature to comment on any number. we are at the start of the process, getting organised and collecting the data. once these tests have been completed, will european taxpayers be on the safe side? will