the current crisis from being accompanied by an across - the - board tightening of financing conditions or from seriously harming the stability of the financial system. we are well aware that crises that incorporate a significant financial downturn are usually deeper and longerlasting. the health crisis will directly affect the profitability of the european banking sector. such profitability was already low before the crisis broke, and events have highlighted the need to tackle even more urgently certain challenges, such as those associated with digitalisation, the management of cybersecurity risks, reputational risks and those relating to climate change. this underscores the importance of making further headway in improving banking efficiency. given the extraordinarily prevalent role played by this sector in the spanish and european economy, how successfully these challenges are resolved will notably influence the intensity and sustainability of economic growth in the coming years. the importance of an extension and selective adaptation of national stimulus measures in the national economic policy arena, achieving the dual aim of supporting the recovery and smoothing the adjustment of the economy to the post - pandemic scenario calls for two actions. first, the authorities must extend and regularly recalibrate some of the measures already applied, which will have to be more closely focused now on the groups of firms, sectors and individuals most affected. and further, their design should enable the structural adjustments needed ahead of the new post - pandemic environment to be brought about. allow me to illustrate this idea in relation to two measures that have been particularly important in recent months : the policies on guarantees and on ertes. indeed, the notable reduction in business activity further to the restrictions associated with the state of alert prompted a much sharper decline in non - financial corporations ’ operating revenue than that in the payments they must meet. the latest central balance sheet data office figures give an idea of the severity of this shock to firms ’ liquidity. there was a strongly adverse impact on these agents ’ profits already in q1, despite the fact that the sharp contractions in activity and operating revenue associated with the declaration of the state of alert only affected the last two weeks of this quarter. the reduction in the return on assets for the overall sample of firms was so significant that it pushed roa below the cost of borrowing, a development not seen since 2014. the information on bank lending shows firms resorting to this source of financing to cover a large portion of these liquidity requirements. specifically, the outstanding balance of bank financing granted to spanish non - financial corporations

recent estimate for canada is that it will average just below 2 per cent over the next two years. this is a percentage point lower than average potential growth in the decade prior to the crisis. we will update this estimate in our next monetary policy report in late october. we believe that some of the potential lost during the crisis will be restored through higher business investment and firm creation. but opinions vary on this. you may have read about a more extreme hypothesis, the idea of “ secular stagnation. ” this is the theory that there is chronically deficient demand in the global economy stemming from persistent headwinds and structural factors that predate the crisis. this is not the bank of canada ’ s baseline view. we expect the cyclical factors restraining growth to continue to dissipate over the next few years. we are already seeing the positive effects on growth in canada and the united states. implications for the neutral rate let me turn now to what this all means for the neutral rate of interest. 5 the gap between the policy rate and the neutral rate serves as gauge of the degree of monetary stimulus in the economy. it helps us to calibrate monetary policy. the neutral rate is to economists what dark matter is to physicists. we are convinced it exists, it plays a central role in our models and analysis, but we can ’ t directly observe it. so it ’ s important to be clear about the concept and the uncertainty around it. the neutral rate i am talking about here is the real risk - free rate of interest that enables the economy to operate at full capacity with stable inflation after cyclical forces have dissipated. it is the interest rate that generates just enough savings to finance investment in the long - run. since savings can flow across borders, the neutral rate in canada is influenced by both domestic and foreign factors. we posted on our website today a background paper on the neutral rate that lays this out very clearly. let me walk you through the highlights. real interest rates have fallen worldwide over the last few decades, including in canada. given this decline and with such low interest rates today, it is reasonable to think that the neutral rate is lower than in the past. there are a number of structural factors related to investment and savings that explain why. currently, investment is being held back by weak confidence and uncertainty about demand. these are cyclical factors, and hardly surprising given the duration of the crisis. the structural undercurrent here, though, is about the speed