themselves have set up a second line of defence against the systemic solvency threat. they have done so by organising, whenever necessary, support to ailing institutions and by systematically supporting the banking sector by means of guarantees and recapitalisation. the difficulties are still there, and in these circumstances there is no room for whatever form of complacency. we have to remain permanently ready to act. my third point concerns confidence. confidence is the most precious ingredient today. it is also the ingredient that is lacking most in the real and financial sphere of the economy at present. having underestimated considerably the true underlying risks that were lying ahead in 2008 and 2009, it would be an error of equal magnitude for the actors of the private sector to now overestimate the risks that are lying ahead over the medium term, for 2010 and beyond. the year 2009 will be very difficult, as i mentioned last thursday. the ecb ’ s governing council considers that economic growth in the global economy and in europe will be substantially lower than projected in early december. however, i see at least four reasons to have confidence in a recovery of the global economy and the industrialised economies over the medium term, after the trying year of 2009 : • the responsiveness of public authorities, central banks and governments, in a difficult situation makes out of the current episode a unique period in economic and financial history. i do not consider that the scope of the actions by public authorities has been sufficiently taken into account by the private actors. • the growth potential of the large and emerging economies is considerable : the deceleration of their growth patterns currently observed will be temporary ; for several of them the potential growth of domestic demand, which today is suppressed, is enormous. • technological progress is remarkable and even accelerating in the current period : it will be the source of an important part of tomorrow ’ s economic growth. • an important factor in the current slowdown has been the spike in oil and commodity prices. this spike was both inflationary and contractionary. the current sharp decline is, by consequence, both dis - inflationary and expansionary. for all these reasons, which are not exhaustive, after an exceptionally difficult 2009, it seems to be a good working hypothesis to me to see 2010 as the year of rebound. the european central bank and the eurosystem will for their part continue to provide a solid anchor of stability and confidence over the medium and long term, in the service of our 329 million citizens.

becomes constrained at precisely the moment they most need it. then, fiscal policy risks becoming pro - cyclical. there are in principle two ways to protect the safe haven status of sovereign debt : the first is a strong fiscal governance framework that is implemented in a credible manner. this means having sufficient buffers over the cycle to absorb exceptional shocks, and having public debt levels that are sufficiently low in good times that they can rise in bad times without disrupting market confidence. the second way is some form of backstop for sovereign debt. in the euro area, due to various aspects of our institutional framework, we have very much pursued the first approach, strong fiscal rules. and this provides an essential anchor for confidence, not only for investors but also among firms and households, and crucially, between countries. the importance of each country sticking to its commitments under the stability and growth pact should therefore be beyond debate. ecb ( 2014 ), financial integration in europe, april 2014. for details see special feature c of financial integration in europe 2014, “ initiatives to promote capital market integration in the european corporate bond and equity markets ”. m. dolls, c. fuest and a. peichl ( 2012 ), “ automatic stabilizers and economic crisis : us vs. europe ”, journal of public economics, elsevier, vol. 96 ( 3 ). bis central bankers ’ speeches indeed, that a sound fiscal framework is necessary in a monetary union goes without saying. whether it is sufficient to safeguard fiscal policy as a stabilisation tool, however, has been challenged by our experience during the crisis. the emu framework was grounded on the assumption that keeping one ’ s fiscal house in order would be enough to ensure market access and ward off contagion. and to be sure, countries with more robust fiscal positions have on the whole enjoyed easier financing conditions and have been more protected from spillovers. but we have also seen that this protection is not absolute. ireland and spain, for instance, had low public debts and deficits on entering the crisis yet suffered serious contagion from greece. and during the phase of the crisis where contagion within the euro area was at its worst, almost all countries saw their credit default swap spreads rise. in other words, as panics can happen in financial markets, even abiding fully with the fiscal rules cannot provide a cast - iron guarantee of affordable market access. so what can governments do in these circumstances to safeguard fiscal policy as a stab