about 200 bps estimated to be consistent with italian and german economic fundamentals. the response to the sovereign debt crisis has thus been two - pronged : individual countries have pledged to adopt prudent budgetary policies and structural reforms to support competitiveness ; a far - reaching reform of eu economic governance has been undertaken, backed by political commitment to strengthen the union. but the time needed to implement europe ’ s complex strategy to counter the economic crisis will necessarily be long. distortions and fragmentation in financial markets can in the meantime undermine the transmission of monetary policy and jeopardize the entire process. this has led to the ecb stepping in with emergency unconventional measures, thus providing a “ bridge ”. the ecb governing council ’ s decision to announce the outright monetary transactions in the summer of 2012 was a response to these dangers. the announcement, an unmistakeable signal of the determination to preserve the euro, reversed the spiral of pessimism at a crucial juncture. by restoring confidence, it produced immediate benefits : as a result of a sharp reduction in the redenomination risks, medium and long - term yields in the countries under pressure decreased and the fragmentation of markets along national borders was attenuated. in the presence of a credible and firm action to restore market confidence, there is no need to actually use the new instrument. but the complete elimination of the redenomination risk can only be achieved if sustained progress is made in the euro - area ’ s economic fundamentals and in the process towards a fully fledged european union. discussion on budgetary and political union must be followed by concrete action. curzio giannini, pitfalls in international crisis lending, in charles goodhart and gerhard illing ( eds. ), financial crises, contagion and the lender of last resort : a reader, oxford university press, 2002, p. 521. bis central bankers ’ speeches the recourse to unconventional measures by major central banks and the expansion of their balance sheets have been justified by the severity of the crisis. central banks ’ unprecedented activism has raised new issues, giving rise to a debate that not only encompasses technical aspects, notably how to exit these measures and normalize monetary policy, but at times touches upon key institutional aspects such as independence of central banks. for example, it has been argued that central bank independence in the pursuit of price stability may be incompatible with an active use of unconventional measures in response to the financial and sovereign debt crisis. it

witnessing a new phase of changes in the forms and the use of money ; supranational money management issues and the problems related to the international lender of last resort function. for each of these themes, giannini ’ s works provide a great deal of evidence of his extraordinary foresight. for instance in the early 2000s he had already clearly anticipated the risk that too narrow a focus on price stability could deflect economists ’ and policymakers ’ attention from the importance of the banking system as the transmission belt of monetary policy. he was also aware of the difficulty in replicating typical central banking functions, such as lending of last resort, at an international level ( e. g. the international monetary fund ) and with respect to sovereign borrowers. or that a monetary union also requires a banking union, and this in turn calls for a greater degree of political integration. or that an area that was often neglected, that of an international framework for debt restructurings, would soon need to be addressed. °°° today, discussing the role of central banks, their independence, and their relationships with other economic and financial authorities has again become an issue of the utmost importance. the idea that the central bank ’ s role must encompass a plurality of functions related to one another, at the core of many of curzio giannini ’ s analyses, has gained growing consent : not only in the field of monetary policy and the management of the payments system, but also for macro - and micro - prudential supervision. this coexistence of tasks has historically characterized the bank of italy, and since the onset of the crisis it is becoming more and more of a feature for many central banks worldwide. central banks conduct monetary policy to achieve the objective of price stability – in most cases their primary goal – which in turn fosters broader macroeconomic stability. but central banks also have responsibilities in the area of financial stability : this is indeed a key precondition for price stability. following the crisis, greater attention is being devoted to the interactions and possible conflicts between policies addressed to maintain, respectively, price and financial stability. for example, in the current crisis, “ unconventional ” measures have been used to address dysfunctional liquidity markets and banks ’ reluctance to lend. in many cases, central banks had no choice but to move into unchartered waters, so as to limit the consequences of inadequate institutional or regulatory frameworks, imprudent behaviour in the private sector or national governments ’