both 2009 and 2010, to have budget deficits in excess of the reference value of 3 % of gdp agreed in the stability and growth pact. furthermore, the euro area debt ratio is expected to increase to more than 80 % of gdp by 2010, some way above the reference value of 60 %. some countries ’ debt ratios will be far in excess of 100 % of gdp. even with some fiscal consolidation in 2010 or 2011, the euro area debt ratio will continue to rise for several years. these numbers are dramatic and their implications are clear. euro area governments must reject calls for further fiscal stimulus. instead, they need to focus on implementing the measures already adopted as quickly as possible. increasing deficits even further is likely to prove counterproductive, for two main reasons. first, increased fiscal deficits could fuel market concerns regarding a country ’ s ability to repay its debt, thereby placing upward pressure on interest rates and leading to worsening financing conditions for everyone. we have already seen a number of euro area countries ’ long - term government bond spreads widen substantially vis - a - vis germany, which demonstrates financial markets ’ ability to distinguish between countries on the basis of their creditworthiness. second, increases in budget deficits could raise concerns about an measured by the change in the general government deficit. increased tax burden in the future, leading consumers to save rather than spend any additional income. this would also undermine the effectiveness of any further fiscal stimulus. looking ahead, the main priority for euro area governments must be to devise exit strategies that remedy those large fiscal imbalances and reduce governments ’ direct involvement in the financial sector. the adoption of credible exit strategies may even make the current measures more effective, as it will indicate to financial market participants that governments are able and willing to reverse unsustainable policies and help to limit the upward drift in long - term interest rates. the most credible exit strategy would be for governments to clearly demonstrate their commitment to returning to sound fiscal policies, in full compliance with the stability and growth pact. the adjustment process should start in principle in 2010 and in any case not later than the economic recovery. the efforts should be stepped up in 2011. why has the euro area been so badly affected? you may wonder why the euro area economy has been so badly affected by the current crisis, given that it originated outside the euro area and the response by euro area policymakers has been timely and effective. one answer to this question can be found in the structural features of the

helped to bring down money market rates and, most importantly, prevented the emergence of a systemic crisis. more recently, we have introduced further non - standard measures to enhance our credit support to the economy through banks. this week we performed our first refinancing operation with a maturity of one year and, as announced following the governing council meeting earlier this month, in july we will begin purchasing €60 billion worth of euro - denominated covered bonds issued in the euro area. overall, the measures adopted so far, which have been unprecedented in terms of their nature, scope and timing, have had a positive, stabilising effect on the economy. however, it is obvious that we cannot maintain the current degree of enhanced credit support indefinitely. macroeconomic conditions will improve, and when they do, we will make sure that the measures adopted are unwound swiftly and the liquidity provided is absorbed, so as to maintain price stability over the medium term. as a result, it is also important that the financial sector does not become dependent on the ecb ’ s long - term financing. the financial sector itself has an important role to play when it comes to restoring confidence among banks. let me now turn to the fiscal policy reaction to the economic crisis. it is important to distinguish between measures intended to support the banking sector and measures aimed at stimulating demand. following the adoption of a concerted european action plan on 12 october last year, euro area governments announced national measures to support the banking sector. these measures, which were approved by the national parliaments of euro area countries without delay, consist of guarantees for interbank lending, recapitalisation, increased deposit insurance and asset support schemes. these steps were necessary and have been successful in safeguarding the stability of the financial system. in addition to this support, euro area governments have also adopted substantial stimulus programmes to counter the negative impact that the financial crisis has had on the real economy. this is in addition to the automatic stabilisers, which are relatively strong in the euro area. the total fiscal support for the euro area economy is estimated by the european commission to be around 4. 6 % of gdp in 2009 and 2010, 2 or around €400 billion. around 60 % of this is due to the automatic stabilisers. although it is mitigating the economic downturn, this extensive fiscal stimulus implies significant worsening of public finances. according to the european commission, 13 of the 16 countries in the euro area are expected, in