to the perception that my counterparty can fail because of lack of capital. we can do little about that. bis central bankers ’ speeches then there ’ s another dimension to this that has to do with the premia that are being charged on sovereign states borrowings. these premia have to, as i said, with default, with liquidity, but they also have to do more and more with convertibility, with the risk of convertibility. now to the extent that these premia do not have to do with factors inherent to my counterparty – they come into our mandate. they come within our remit. to the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channel, they come within our mandate. so we have to cope with this financial fragmentation addressing these issues. i think i will stop here ; i think my assessment was candid and frank enough. thank you. bis central bankers ’ speeches

of that projection, we expect that the eventual u. s. recovery will be much slower than usual. for example, we project that it will take two and half years from the onset of the recession for u. s. gdp to return to its pre - recession level. this sluggishness reflects the lingering effects of the crisis on the u. s. financial system and the slow recovery of domestic consumption owing to the magnitude of wealth effects and the deterioration in the labour market. reflecting the seriousness of the shock, the global macroeconomic policy response has been unprecedented. in the wake of the intensification of the crisis, monetary policy rates have been substantially and rapidly reduced in most major economies. fiscal policy initiatives have also been robust, with the world well on its way to spending an average of more than 2 per cent of global gdp in discretionary fiscal measures. these measures will replace some of the lost private demand and – equally importantly – create a window for the necessary rebalancing of global growth. simultaneous fiscal action is not only more powerful than measures taken in isolation, but also has the potential to provide some support for commodity prices. given typical lags, the effects of these monetary and fiscal policies will be felt increasingly over the course of this year and 2010. canadian outlook – sharp recession and milder - than - usual recovery the global downturn and declining demand for our exports will make this a very difficult year for canada's economy. we are now in recession with gdp projected to fall by 1. 2 per cent this year. the first half of the year will be particularly challenging with sharp falls in activity and increases in unemployment. unfortunately, last friday's employment report is broadly consistent with our outlook. the 14 per cent drop in our terms of trade since july will translate into a significant reduction in canadian incomes and thus in our ability to sustain real domestic spending in the economy. losses by canadians on their financial holdings, either directly or via their pension funds, and concerns about the employment outlook will also restrain domestic consumption this year. uncertainty about the economic outlook and strained financial conditions should lead to declines in investment spending this year. in our base - case projection, real gdp is expected to rebound in 2010, growing by 3. 8 per cent. though seemingly impressive when viewed from the depths of a recession, such a recovery is actually more muted than usual. the recovery should be supported by : • the timeliness and scale of our monetary policy response ; • our relatively well -