in greater detail at the various ways in which the european central bank has responded to the financial crisis, the rationale underlying those actions and the effects of those measures. i will focus on the means by which the ecb ’ s monetary policy has been implemented, which are of vital importance in the light of the current crisis. the first phase of the turbulence during the first phase of the financial market turbulence, which ran from august 2007 to midseptember 2008 and was characterised by a systemic shortage of liquidity, the ecb modified the technical procedures used for the supply of liquidity in normal times, using all of the room for manoeuvre provided by its operational framework for the implementation of monetary policy. • first, the eurosystem adjusted the distribution of liquidity over the reserve maintenance period, providing liquidity earlier than in normal times. thus, at the beginning of the reserve maintenance period we systematically allotted liquidity in excess of the theoretical benchmark amount in our main refinancing operations, while still aiming for balanced liquidity conditions at the end of the maintenance period. the total amount of liquidity provided in the course of the maintenance period thereby remained unchanged. these measures sought to take account of the changing profile of banks ’ demand for liquidity. • second, the eurosystem also provided the banking system with liquidity through open market procedures, which had rarely been used – if at all – prior to the turbulence. particularly in response to banks ’ increased demand for longer - term financing, the eurosystem extended very significantly the average maturity of its lending to euro area banks. consequently, with a view to leaving the total amount of outstanding refinancing unchanged, the amount of liquidity provided through oneweek main refinancing operations was reduced accordingly. • it is also important to note that international cooperation between central banks was strengthened at a very early stage through increased exchanges of information and the collective monitoring of market developments, and then, in mid - december 2007, through concerted measures in the implementation of monetary policy ( which for the ecb meant providing euro area banks with liquidity in us dollars ). in the past, cooperation between central banks had traditionally concerned the area of exchange rate policy. these measures allowed the eurosystem to manage the tensions observed in short - term interest rates, as well as having a positive effect on conditions in longer - term markets. the second phase of the turbulence however, in mid - september 2008 concerns regarding credit risk

real cost of adjustment and the burden borne by the more vulnerable members of society. it calls for greater determination in further addressing rigidities in wage setting and increasing competition in many segments of the economy. reducing rents is not only a matter of efficiency in the adjustment process : it is also a matter of equity in sharing the burden of adjustment. 3. the outlook for emu prior to the crisis, member states did not internalise fully what it means to be part of emu. fiscal and economic policies were not sufficiently geared towards the conditions of being a member of a single currency zone. but the lessons of the crisis have been learnt. eu heads of state and government have taken action and strengthened the governance framework. the current deepening of emu is essential, in particular as regards banking union. it is of utmost importance that the legislation on the single supervision mechanism ( ssm ) is finalised before the summer break now that a political agreement has been found. this is an absolute prerequisite if we want to embark upon our preparatory work in a timely and effective fashion, so that the ssm is operational by mid - 2014. equally important is the swift set - up of a single resolution mechanism ( srm ) : it is a necessary complement to the ssm and a key element of banking union. the commission ’ s intention to put forward a legislative proposal before summer is highly welcome. in the meantime, the directive on bank recovery and resolution will hopefully be adopted and provide for a coherent eu - wide set of rules. deeper economic union means more than fixing the financial system. we therefore welcome the proposal to conduct ex - ante coordination of structural reforms initiatives, which should be implemented as a best - practice benchmarking exercise. in the same vein, reform contracts, bis central bankers ’ speeches in which member states commit to concrete reforms with specific timelines, would also facilitate the recovery of competitiveness. but new rules are only as good as the commitment to actually implement them. it is of key importance that the existing legislation is applied forcefully during the ongoing european semester : this represents a true test of the credibility of emu ’ s governance framework. i thank you for your attention and stand at your disposal for questions. bis central bankers ’ speeches