programme ( pepp ) over the current quarter to be conducted at a significantly higher pace than during the first months of the year. we also confirmed our other measures to support our price stability mandate, namely the level of the key ecb interest rates, our purchases under the asset purchase programme ( app ), our reinvestment policies and our longer - term refinancing operations, as detailed in the press release published at 13 : 45 today. we stand ready to adjust all of our instruments, as appropriate, to ensure that inflation stabilises at our two per cent target over the medium term. i will now outline in more detail how we see the economy and inflation developing, and then talk about our assessment of financial and monetary conditions. economic activity the economy rebounded in the second quarter of the year and, as restrictions are eased, is on track for strong growth in the third quarter. we expect manufacturing to perform strongly, even 1 / 3 bis central bankers'speeches though supply bottlenecks are holding back production in the near term. the reopening of large parts of the economy is supporting a vigorous bounce - back in the services sector. but the delta variant of the coronavirus could dampen this recovery in services, especially in tourism and hospitality. as people return to shops and restaurants and resume travelling, consumer spending is rising. better job prospects, increasing confidence and continued government support are reinforcing spending. the ongoing recovery in domestic and global demand is boosting optimism among businesses. this supports investment. for the first time since the start of the pandemic, our bank lending survey indicates that funding of fixed investment is an important factor driving the demand for loans to firms. we expect economic activity to return to its pre - crisis level in the first quarter of next year. but there is still a long way to go before the damage to the economy caused by the pandemic is offset. the number of people in job retention schemes has been declining but remains high. overall, there are still 3. 3 million fewer people employed than before the pandemic, especially among the younger and lower skilled. ambitious, targeted and coordinated fiscal policy should continue to complement monetary policy in supporting the recovery. in this context, the next generation eu programme has a key role to play. it will contribute to a stronger and uniform recovery across euro area countries. it will also accelerate the green and digital transitions and support necessary structural reforms that lift long - term growth. inflation inflation was 1.

, investment and export activity. liquidity tensions were significantly eased by greek banks ’ recourse to the monetary policy operations of the eurosystem and to emergency liquidity assistance ( ela ) from the bank of greece. thanks to the ample provision of liquidity from these sources, the decline in bank credit to households and businesses was much milder than the shrinking of the banks ’ deposit base. thus, the bank of greece contributed to mitigating the adverse impact of the sovereign debt crisis on economic activity. bis central bankers ’ speeches heightened uncertainty in the first half of 2012 posed major risks to the banking system in the january – september 2012 period, the banking groups listed on the athens exchange recorded losses of eur 5. 1 billion. these losses reflected, on the one hand, additional writedowns on their greek government bond holdings as a result of psi and, on the other, impairment charges on loans to the private sector. accumulated losses led to a sharp decline in banks ’ capital adequacy ; thus, their recapitalisation became necessary. the npl ratio for the banking system as a whole rose to 22. 5 % by end - september 2012, from 16 % at enddecember 2011. despite the adverse conditions, the risk of instability was averted the uncertainties that prevailed during the prolonged election period led to successive surges in cash outflows from banks, requiring the latter to be supplied with an exceptionally large amount of banknotes to banks. the banks ’ needs for banknotes were fully and efficiently met by the bank of greece. even in the direst of circumstances, there was not the slightest doubt as to the banks ’ ability to repay customer deposits. otherwise, there would have been a collapse in confidence, with devastating consequences for financial stability and greece ’ s membership of the euro area. despite the extremely adverse conditions, action taken by the government and the bank of greece ensured that the banking system weathered the shock and that not one depositor lost a single euro of their savings. this response averted a collapse in confidence in the banking system and ultimately an exit from the euro area. the recapitalisation of banks is under way in may and december 2012, the four big banks identified as viable by the viability assessment exercise of the bank of greece received an advance payment from the hellenic financial stability fund ( hfsf ) to replenish their capital above the regulatory minimum. the next steps of the recapitalisation process involve the