context of a severely impaired interbank market was capable to alleviate banks ’ concerns about access to liquidity and thereby to support the flow of credit to households and corporations and ensure the maintenance of price stability. all our non - standard measures – enhanced credit support and securities market programme – were exceptional responses to extraordinary circumstances and as such temporary in nature. specifically, all measures taken during the period of acute financial market tensions are fully in line with our mandate. overall, our non - standard measures have proved effective. this contradicts academic literature on the “ irrelevance of monetary policy operations ”. however : these measures represent strong medicine. we therefore need to constantly assess whether or not it is still warranted. the ecb has a strategy in place to phase out the liquidity support measures. the process of phasing out started in december 2009 : we suspended liquidity provision at maturities of 6 - month and 1 - year ; the covered bond purchase by now the following liquidity support measures have remained in place : unlimited liquidity provision in our refinancing operations at a fixed interest rate and the smp. how will the phasing out process proceed? our decisions will be guided by gradualism and steadiness and will be consistent with improvements in financial market conditions and real activity. in my view, conditions in both money and financial markets have improved significantly over recent months, notwithstanding the most recent tensions in some segments of the european sovereign debt market. since summer, the amount of liquidity demanded in ecb refinancing operations has declined by about one third ( not taking into account the cbpp : from eur 881 bn on 30 june this year to eur 510 bn today ). as a consequence, excess liquidity has dropped by about 60 % ( from eur 220 bn on 30 june to eur 87 bn ). this process has been driven by receding demand on the part of financial market participants. furthermore, we have experienced a re - activation of the interbank money market : the eonia volume has nearly doubled since summer ( from eur 26. 3 bn on 30 june to eur 45. 7 bn yesterday ). i would take this development as a positive sign that banks trust each other more. nevertheless, the question remains whether there is something that has changed in interbank money markets which would lead to lower activity at present and in the future – temporarily or permanently. furthermore, to what extent does the fixed - rate full all

. while governments show little hesitation in increasing expenditure or decreasing taxes in periods of economic slowdown, there is reluctance to initiate unpopular consolidation measures once prosperous times return. as a result, a ratchet effect occurs : deficits only go up, not down. appropriate fiscal policy rules add to macroeconomic stabilisation. while discouraging discretionary fine - tuning, they allow a full operation of automatic stabilisers. these automatic stabilisers result in lower tax receipts and higher unemployment - related government expenditure in the event of an economic downturn, thus supporting aggregate demand and income. an appropriate medium - term reference value for the government budget balance also prevents the sustainability of fiscal policies from becoming a problem, a subject on which i will say more in a few moments. more generally, a rule - based system for fiscal policy provides clear yardsticks against which other policy - makers and the public can measure the current and future course of policies. it sets up a stable and predictable environment, which allows markets to operate more efficiently, and supports longerterm decision - making by the public and by corporations. moreover, fiscal rules regarding budget deficits have the advantage of promoting an efficiency analysis of government plans. if a government wants to increase certain expenditure when the route to deficit - financing is blocked, it has to weigh the benefits of such expenditure against the cost of increasing taxes or decreasing other expenditure. the case for fiscal rules is even stronger in a monetary union like the euro area. with a centralised monetary policy and decentralised fiscal policies, there could be a temptation to have higher deficits. this is because part of the consequences of lax fiscal policies, in the form of higher real interest rates, will be borne by all the other participants in the monetary union. thus, in order to avoid such spillovers to countries pursuing sound fiscal policies, a fiscal framework is required, even more so than in the case of an individual country. while there are thus many advantages to fiscal rules from a fiscal and general macroeconomic angle, i also support the conduct of fiscal policy on the basis of predetermined rules from a monetary policy point of view. monetary and fiscal policy are interacting, as they both have an impact on key macroeconomic variables. fiscal policy, for one thing, affects prices via its effects on aggregate demand, or via changes in indirect taxes. monetary policy, on the other hand, affects short - term interest rates, which influences the government budget and the economic environment in which governments