us real gdp fell by around 5 %. in the euro area the recession was equally severe but, again, not comparable in scale to the events of 1929 – 1933. the great recession was painful but it was not a second great depression. while “ ex post ” policies are an important part of policy - makers ’ toolkit, they are by no means a “ free lunch ”. dealing with the recent financial crisis carried a substantial fiscal cost9. in particular, debt - to - gdp ratios have increased as a result of bank bail - outs as well as due to the effect of the economic downturn on fiscal revenues and social expenditures. for advanced economies, the imf reports a median increase in the ratio of debt to gdp of 25 percentage points and a median direct bail - out cost of 6 % of gdp. these fiscal strains are keenly felt throughout europe at the current juncture. the policy conclusion i want to draw from these facts is : even when the “ ex post ” policy response is successful at attenuating the immediate impact of a financial crisis on the real economy, the build up of public debt carries substantial costs of its own. in matters of financial stability ( just as in medicine ), “ prevention ” is always better than “ cure ”. let me now turn to discussing “ ex ante ” preventative policies. the crisis revealed that our “ ex ante preventative ” policy tools were insufficient to deal with the build up of systemic risk. many of the post - crisis efforts by central banks, regulators and national governments have, therefore, focused on rectifying this deficiency. an important lesson from recent crisis was that policies aimed at ensuring the stability of individual institutions ( which is what micro - prudential regulation does ) were not sufficient to prevent the under - pricing of risk and excessive balance sheet growth. even though individual banks looked healthier than ever in 2007, the system as a whole was more fragile than ever. this is why, in january 2011, the european systemic risk board ( esrb ) was established and charged with ensuring the integrity of the eu ’ s financial system. the esrb ’ s main tasks are threefold : to identify and prioritise systemic risks ; to issue early warnings when significant systemic risks emerge ; and to issue policy recommendations for remedial action in response to the risks it identifies. in addition, today ’ s globalised financial market implies that the efforts aimed at crisis prevention must have a global dimension. this is why agreeing

medium term. developments within m3 clearly reflect market participants'specific investment responses to the intensification of the financial turmoil, but increasingly also the impact of the past reduction in the key ecb interest rates. as this reduction has narrowed the gaps between the interest rates paid on the different categories of short - term deposits, it has fostered shifts in the allocation of funds. for example, the demand for overnight deposits further strengthened in february and contributed to the rise in the annual growth rate of m1 to 6. 3 %, while the demand for short - term time deposits weakened considerably. the flow of mfi loans to non - financial corporations and households has remained very subdued. the slightly negative flow of lending to non - financial corporations in february reflects a decline in the outstanding amount of loans with a shorter maturity, while the net flow in loans with longer maturities remained positive. the decline in short - term lending may be indicative of a reduction in loan demand related to the weakening of economic activity. however, supply effects have probably also affected loan developments. in this respect, developments over the past few months may in part reflect ongoing efforts of banks as well as the corporate and household sector to reduce the highly leveraged positions built up in past years. to sum up, today's decision takes into account the expectation that price pressures will remain subdued, reflecting the substantial past fall in commodity prices and the marked weakening of economic activity in the euro area and globally. the latest economic data and survey information confirm that the world economy, including the euro area, is undergoing a severe downturn. both global and euro area demand are likely to remain very weak over 2009, before gradually recovering in the course of 2010. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council's aim of keeping inflation rates at levels below, but close to, 2 % over the medium term. a cross - check with the outcome of the monetary analysis confirms that inflationary pressure has been diminishing. after today's decision we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. the governing council will continue to ensure a firm anchoring of medium - term inflation expectations. such anchoring is indispensable to supporting sustainable growth and employment and contributes to financial stability. accordingly, we will continue to monitor very closely all developments over the period ahead. regarding fiscal policies, it is necessary that countries'commitments to a path of consolidation