the global financial crisis on the economy and, potentially, on price developments has been unprecedented. we have taken unprecedented measures in response, aiming pre - emptively and forcefully to avert risks to price stability, in accordance with our primary mandate. first, we have reduced our key interest rate to 0. 75 %, a level previously unseen in virtually all euro area countries. the interest rate in the overnight interbank market is now even lower, close to zero. second, we have acted to prevent an abrupt reduction in the supply of credit to the real economy. we have given banks unrestricted access to central bank funding in all our refinancing operations. we have extended significantly the average maturity of these operations. we have broadened the set of eligible collateral. this assurance of funding to banks has prevented disorderly deleveraging in the financial sector and averted a collapse in money and credit, with potentially severe implications for price stability, and thereby employment and growth. all these decisions have ensured price stability and stabilised inflation expectations during an exceptional period. naturally, the ecb is aware of the challenges arising from a protracted period of low policy rates and ample liquidity. let me elaborate on the three main challenges. bis central bankers ’ speeches the first is that low interest rates may affect the ability of savers and investors to generate returns. this is especially the case for institutions targeting nominal returns, such as insurance companies and pension funds. yet, by ensuring price stability throughout the crisis, monetary policy has contributed to more stable financial conditions. this is central to the interests of savers and investors : there can only be sustainable returns in a stable environment. the second challenge relates to incentives. a protracted period of low interest rates and ample liquidity facilitates rolling - over loans at very low costs. banks may therefore have less incentive to monitor credit risk properly and may provide too many loans to non - profitable business. over time, such misallocation of financial resources would undermine overall productivity and depress growth and employment. the third challenge is that protracted monetary accommodation may fuel bubbles in house prices and other asset markets. as the crisis has painfully demonstrated, the bursting of such bubbles inflicts large costs for the real economy. in this context, a natural question is whether monetary policy should be used actively to contain asset price booms and bubbles – a response known as “ leaning against the wind ”. thanks to our monetary policy strategy, implicitly we do this to some extent. we

we currently face in this region. this is not a time for complacency, but it is perhaps useful to step back for a moment from present difficulties to reflect on how far we have come, as a region, in the past fifty years. fifty years ago most of this region was still recovering from the devastation of world war two ; many countries were to face more upheaval in the years that followed. but over the last few decades the region has, through a variety of economic strategies and in differing degrees, enjoyed growing prosperity, greater stability, advancing crossborder co - operation, and, increasingly, freedom from the poverty and strife that confronted earlier generations. this has all been achieved in a context of globalization and economic liberalization. the current turmoil has interrupted some of this progress, and has reminded us that rapid economic expansion is not without its risks. the damage to some economies has been severe. but the foundations remain strong, and the prospects for the next half - century are, in my view, favourable ones. the signs of economic revival are already with us. recovery may be a – 10 – longer and more difficult process than some of us had expected a year or more ago. but there is no doubt that it will come. it is now up to us, as partners in this large and diverse region, to seize the initiative, and turn that recovery into an enterprise that will make us stronger, more cohesive, and more capable of managing the stresses and uncertainties that a global financial system must inevitably produce. * * *