the greek government was seriously degraded, particularly after the eurogroup ’ s decision to withdraw the safety net granted to greece. that led to us not authorising new drawdowns from the central bank, while maintaining the current level of liquidity. i regard this as a measured decision as it does not create an irreversible situation. are you going to continue providing support to the banks until sunday evening? we are going to continue the support until further notice. the situation is being constantly monitored by the governing council. what is the ecb ’ s exposure to greece? on the one hand, there are the loans extended to greek banks by the eurosystem, with a total value of more than €116 billion. on the other hand, there is the outstanding debt under the debt purchase programme established in 2010 ( smp ), which amounts to close to €20 billion. are we looking at a scenario entailing a potential loss of close to €135 billion if greece leaves the euro? i do not want to speculate on that. greece can remain in the euro area. what would be the consequences for the euro area of a “ no ” vote in the referendum, which would undoubtedly lead to “ grexit ”? a distinction must be made between the short and long - term impact. the reaction of global financial markets on monday demonstrated that they were surprised. up until friday evening, it was not envisaged that the negotiations would break down and a referendum would be bis central bankers ’ speeches called. the markets have become risk - averse. but their reaction remains relatively calm. this shows the extent to which greece ’ s current situation is a unique one – it is a special case. other countries in the euro area have experienced great difficulties. they have been through adjustment programmes, and come out of them. for these countries, this has been a chapter with a successful conclusion. this is the case in ireland and portugal. the cypriot programme is still ongoing and proceeding well, which should allow the ecb soon to begin purchasing cypriot securities. i do not underestimate the efforts these programmes have required, or their social costs. the citizens of these countries have paid dearly. but when ambitious reform programmes are adopted and implemented, that is what happens! these countries are on the road to recovery. the markets have been quite calm so far. but what if the situation worsens? their reaction also shows the resilience of the euro area to external shocks

lorenzo bini smaghi : monetary and financial stability in the euro area speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the europe festival conference on “ the state of the union ”, florence, 10 may 2011. * * * introduction it is a great pleasure for me to contribute to this europe festival conference on “ the state of the union ”. before turning to my assigned topics, which concern the euro and the monetary policy of the union, i would like to start with a few general comments. there can be no doubt that these are challenging times for europe. but the current crisis does not just affect europe, it affects the whole of the west. problems such as the sustainability of public finances and the role of the state in the economy, immigration and burgeoning income inequality, concern not only europe and the euro area, but the whole of the industrialised world. moreover, this is not a cyclical crisis but a structural one, resulting from the profound changes now sweeping the world. hundreds of millions of people have risen over the survival threshold, over two - thirds of the world ’ s population has opted for the market economy model, and there is a perception of a lack of progress in economic and social development and also in civil rights in a large part of the world. there is probably no historical precedent for the speed at which these changes are taking place. but this is not to say that history is not instructive and no useful lessons can be drawn from it. to understand how to face the challenges ahead of us, it may be useful to understand how similar challenges were faced and overcome in the past, and particularly how some were able to make progress while others lost ground at times when the pace of globalisation accelerated. much has been written recently on this subject. niall ferguson and ian morris, for instance, examine the reasons why the west has “ ruled ” the world – at least until now. 1 in essence, they assert that civilizations developed and rose to dominance when they were open to innovations from abroad and were able to develop and use them to their advantage. this applies to both migratory flows and imports of agricultural or manufactured goods, ideas and scientific innovations, in a context of competition. those who were closed to globalisation declined, even if they had achieved a leading position in economic, technological or military matters. that is the reason why, according to jared diamond, a european, rather than a chinese explorer,