and bank lending rates, the governing council also introduced a number of non - standard measures. notably, the eurosystem provided unlimited liquidity to banks at a fixed interest rate and at maturities of up to one year. it also provided liquidity in foreign currencies, extended the list of eligible collateral and purchased covered bonds outright. these measures have contributed not only to lowering perceived liquidity risks on the part of banks, but also to a better flow of credit to households and firms than would otherwise have been the case. the ecb ’ s approach differs from that of some other central banks in many respects. notably, our outright purchases of securities have been limited to the covered bond market, a market segment that is very important in europe and a primary source of financing for banks. moreover, we have refrained from buying government bonds. this has been different in other regions, especially in the united states and the united kingdom, as you can see from this slide. notably, in providing extra liquidity, we have relied primarily on repurchase agreements ( red parts of bars ), whereas the united states and the united kingdom have focused on buying securities outright ( blue parts of bars ). from the very beginning, we have been aware of the fact that keeping our non - standard measures in place for longer than necessary would entail the danger of creating harmful distortions. therefore, we designed the measures with exit considerations in mind. in view of the improvements in financial market conditions seen since last spring, we have started to gradually phase out some of them. more specifically, we have stopped providing liquidity in foreign currencies, and we have stopped operations involving maturities longer than three months. also, we have decided to return to variable rate tenders in the regular three - month operations towards the end of this month. however, the eurosystem will continue to provide liquidity support to the euro area banking system at very favourable conditions in its shorter - term refinancing operations ( that mature after one week and after approximately one month ). we have decided to do this for as long as necessary and at least until mid - october this year. the speed and path of the subsequent gradual phasing - out of the non - standard measures will depend on economic and financial market developments. the remaining measures are not many. they include, inter alia, the tender procedures to be applied in the main refinancing operations and the operations with a duration of one maintenance period

of the world very closely, as well as the evolution of commodity prices and their potential impact on global inflation. notably, a multi - speed recovery of the world economy, with some regions growing fast, while the recovery in others remains rather slow, has the potential to exert upward pressure on prices. in the same vein, we also need to monitor very closely the possible adverse impact from fiscal developments on the inflation outlook. all in all, risks to the inflation outlook seem to be tilted to the upside. this notwithstanding, inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2 % over the medium term. let me turn to the banking sector. adjustments are continuing in light of a re - focusing on core business and markets, the necessary re - organisation arising from state aid and forthcoming changes to regulatory environment. although there have been improvements, profitability remains subdued. further credit - related write - downs are expected throughout this year, and the risk of a negative feedback loop emerging between the household and corporate sectors and the banks persists. banks ’ may remain under pressure to continue the process of deleveraging, with possible credit constraints impacting on economic growth in the event of credit demand picking up. thus, although the response of policy - makers to the crisis has certainly helped to avert an even more dramatic collapse in economic activity in the euro area and elsewhere, challenges abound. indeed, most advanced economies will continue to face severe macroeconomic imbalances in the years to come. i am particularly concerned about the dramatic deterioration in public finances, which will require very ambitious fiscal consolidation efforts in the years to come. we may already have entered into the next phase of the crisis : a sovereign debt crisis following on the financial and economic crisis. fiscal policy challenges most governments in the advanced countries will exit from the recession with the highest deficit and debt - to - gdp ratios recorded in times of peace. as can bee seen in the chart, the general government deficit in the euro area is expected, according to the latest projections by the european commission, to exceed 6. 0 % of gdp in 2009, 2010 and 2011. in japan, the government deficit - to - gdp ratio is foreseen to reach around 9. 0 % of gdp in these years, whereas the uk and us government deficits are expected to be in excess of 10. 0 % of gdp in the period 2009 – 11. these high government deficits are reflected in mounting government debt