support. the baltic countries have demonstrated that adjustment is possible – even without currency devaluation. while lithuania ’ s government deficit stood at 9. 4 % in 2009, last year it had fallen to 2. 1 % and is expected to decline further. bis central bankers ’ speeches beyond the economic aspects, the baltic success story also shows that adjustment is politically feasible. despite major fiscal consolidation, there was hardly any public protest against the government measures. so how was this possible? in my view, we can draw an important lesson from the baltic experience : governments not only acted boldly, but also immediately. they used the momentum of the crisis to implement the necessary consolidation and thus managed to convince the public of the need for these measures. besides being politically astute, this swift and bold action was key in strengthening investors ’ trust. it enabled the baltic countries to recover quickly from recession. the baltic case shows that – while consolidation might weigh temporarily on economic growth in the short term – it is the basis for sustainable growth in the longer run. beyond showing commitment to making its own economy fit for the euro area, lithuania has also contributed to making the currency union as a whole more stable – even before becoming part of it : the priorities set last year under its eu presidency included more steps towards banking union and a further deepening of economic and monetary union. to resume, the euro area benefits from lithuania ’ s accession in at least two ways : first, lithuania has shown that adjustment is not only necessary, but also possible – even without currency devaluation ; second, lithuania ’ s decision to join the euro area demonstrates that our common currency is attractive, despite difficulties in some euro area member countries. how will lithuania benefit from becoming part of the euro area? but does the lithuanian public agree that lithuania will benefit from membership of the euro area? or is the introduction of the euro just a project of the political elites? i am aware that some lithuanians would rather stick with the litas. according to survey data, only half of the population favours the introduction of the euro. we certainly need to take such scepticism seriously. europe cannot simply be a project that is imposed by the elites without the backing of the general public. recent experience shows, however, that initial scepticism might well turn into support, once people become more informed about their new currency and the changeover modalities. prior to their respective accessions, it seemed that citizens in the other baltic countries were

time, the uncertainty about the liquidity situation of banks is reduced, so that banks can increasingly lend each other money again, even across the borders of the member states. the focus of this instrument on the real economy is particularly illustrated by the fact that not only in the first step is the existing loan portfolio crucial for the allocation of liquidity, but also in the second step the trend over the period of the transaction will be considered. thus, banks are required to expand further their lending to business and households in the coming months and years. to reinforce these measures, the governing council decided last week to start purchasing asset - backed securities ( abs ) as well as covered bonds, such as pfandbriefe, in october. the details of these two programmes will be announced after the council meeting in early october. the decision to start buying abs is the first result of intensive preparations that are still ongoing. for me it is clear that these measures are aimed at the monetary policy transmission channel. they should not be equated with a broad programme of quantitative easing ( qe ), nor with overtures to it. moreover, the economic logic of the anglo - saxon qe programmes cannot be applied one to one to a bank - financed economic system like that of the euro area. also, qe effectiveness would be questionable in the light of the eroded yields of marketable securities. the surge in the markets for interest - bearing securities would also strain the soundness of our balance sheet, should we make large - scale purchases in such an environment. and it goes almost without saying that the purchase of government bonds would raise considerable institutional, instrumental and legal issues. although some are apparently pushing in this direction, this option would only be considered on two conditions : 1. if prices stay at their current very low level for too long, and 2. strict compliance with our monetary policy mandate. but back to the market for abs. we have been looking at this closely for some time. we believe that it could be an important channel for increased lending to small and mediumsized enterprises. because of their size, smes cannot generally issue bonds. if banks now get a chance to securitise loans to smes, and to sell them to other investors, a major obstacle to long - term lending to these enterprises is removed, namely the risk of non - payment and the low liquidity of these loans in difficult times. a functioning abs market can therefore make an important contribution to ensuring that our monetary