13. 10. 2020 panel : macro economic policy in transition – perspectives from advanced and emerging countries imf annual meetings : macro conversations pablo hernandez de cos governor as in the rest of the world, the covid - 19 outbreak has given rise to a health and economic crisis in the euro area that is unprecedented in recent history. and, again, similarly to other jurisdictions, economic authorities have in the face of this situation responded forcefully both at the domestic and european level. in the particular case of monetary policy, in the last seven months, we, at the european central bank ( ecb ), have deployed an extensive package of measures to mitigate the impact of the pandemic on the euro area economy. from the outset, the ecb faced three significant pandemic - related challenges : first, the need to stabilise financial markets throughout the euro area, to head off cross - country financial fragmentation ; second, to protect the supply of bank credit, which is especially important for funding for households and smes in europe ; and third, to counter the downward pressure on the medium - term inflation outlook stemming from the covid 19 crisis, in accordance with our price stability mandate. against this backdrop, we adopted a series of measures that may be grouped into two main blocks. as regards the first block, the ecb approved a broad raft of measures to provide liquidity to banks so that they, in turn, were able to ensure access to credit for households and firms. the measures included a significant improvement to the conditions of the tltro iii operations. these have enabled banks to obtain long - term funding at beneficial interest rates, which may temporarily be as low as 1 %, on the condition that the participating banks maintain their supply of credit to the real economy. and we also eased the collateral eligibility criteria for banks in the ecb ’ s refinancing operations, thus increasing the volume of funds they may obtain. the measures have been highly successful. in the june tltro - iii operation, participating banks received liquidity for an amount of €1. 3 trillion, an all - time high in eurosystem refinancing operations. the available evidence suggests that banks are using a significant portion of the funding received to continue to provide liquidity to the real economy. we also approved a second block of measures, relating to the asset purchase programmes. since end - february, financial conditions had tightened in the euro area, with both corporate and sovereign risk spreads widening

considerably. and the spread widening in the euro area was uneven : countries that started from weaker fiscal positions, with higher debt levels, and those most affected by the first wave of the pandemic witnessed a much more pronounced increase in their financing costs. this cross - country financial fragmentation hindered the transmission of the single monetary policy to the whole of the euro area, and even posed a threat of a repeat of the 2012 sovereign debt crisis. in this context, in march the ecb announced the launch of the pandemic emergency purchase programme ( pepp ). the key difference with previous programmes is that purchases are now conducted in a flexible manner and fluctuations in their distribution will be allowed over time, among jurisdictions and across asset classes, with a view to preventing fragmentation in monetary policy transmission. the volume of purchases initially announced under the pepp was €750 billion for the whole of 2020. in june the term was extended up to at least june 2021, and the volume by a further €600 billion, making for a total of €1. 35 trillion. the pepp, together with the new purchases under the asset purchase programme ( app ), will increase the portfolio of the eurosystem ’ s securities purchase programmes to around €4. 4 trillion in june 2021. in early october 2020, net purchases of public and private sector assets under the pepp had already reached €567 billion since its launch at the end of march, i. e. 42 % of the current envelope. today we can safely say that the pepp has been clearly successful in curbing financial market deterioration in all euro area countries. this is particularly visible in sovereign yields, which are now close to their pre - crisis levels ; but it may also be perceived in other market segments such as that for corporate debt. and, of course, this decline in the cost of sovereign debt has provided policy space for fiscal authorities in all euro area countries, enabling them to take unprecedented measures to sustain the income of households and firms. indeed, the reaction of fiscal policy has also been swift and timely, both at the global and at the european level. national authorities approved sizable fiscal policy packages, focused on providing income support to firms and households, and on shielding the health - care system. it is worth noting the role of liquidity support schemes for firms, in the form of loans with favourable conditions, new credit facilities and public guarantees. in this setting, supranational support at the european level has also