chains. a shock in one country can disrupt the entire supply chain, especially as countries nowadays rely more on just - in - time delivery and therefore hold lower inventory stocks. hence, the virus could give further impetus to the recent trend of deglobalisation. although i am certainly not supportive of some of the protectionist drivers of this trend, it is not inconceivable that companies will reconsider their dependence on one specific supplier or country and diversify or even re - shore their production process. notably, a trend of reshoring was already triggered before the coronavirus due to digitalisation, as this enables companies to reduce the costs of producing at home. for critical products it is likely, and perhaps even desirable, that companies will keep larger stocks or increase domestic production capacity going forward. in addition, authorities may engage in policy measures that have an impact on global value chains. for example, the japanese government has already reserved the equivalent of 2 billion euros to encourage companies to bring back production to their own country and reduce their reliance on supply chains. if sustained such measures could have a long - lasting impact on global trade and, hence, global economic activity. reflections for monetary policy clearly, all phases that i have outlined also come with important policy challenges for central banks. as discussed, in the preservation phase, the brief for monetary policy is fairly straightforward. our policy is directed at maintaining favourable financing conditions for households, firms and governments, to mitigate any amplification of the ‘ corona shock ’ through financial channels. however, the challenge does not stop there. monetary policy will likely need to continue to play an important role in the recovery phase. private sector activity is expected to recover only gradually. not only because restrictions will be removed slowly. but also because economic uncertainty is likely to fout! onbekende naam voor documenteigenschap. linger as long as a vaccine is not yet available and the possibility of a renewed lockdown remains. the negative effects of the virus outbreak on aggregate demand might thus be quite persistent. simultaneously however, firms will need to adjust production processes and business models to a 1. 5 meter economy, which will have an effect on productivity and perhaps also on wage and price formation. this, together with the potential slicing up of global value chains, amounts to the negative supply shock i alluded to. as of yet, it remains unclear whether demand or supply effects of the corona - outbreak will dominate. the effects of the

. debt levels range from close to non - existent in estonia, to 175 % of gdp in greece, though we know that headline number to be somewhat inflated. of course, while public debt levels offer a useful indicator of the fiscal space governments have available to fight the crisis, they are a narrow indicator of countries ’ overall resilience. this also depends on other factors, such as growth potential and household and corporate debt levels. these also differ widely across the euro area. looking at banks, we know that, in terms of capital buffers, banks are in a better position than in 2008. yet, the banking sector remains heterogeneous. non - performing loans as a share of total loans outstanding, for instance, still vary significantly across countries. this is a legacy of the previous crisis, which we will need to keep a serious eye on to prevent new problems from emerging. the diverging resilience of households, firms, banks and governments implies that there is no onesize - fits - all policy advice as to how best preserve and restore the economy. in some cases, it might be possible to tap into the balance sheets of stronger sectors, to help the weaker ones. such withincountry solidarity can be welfare - enhancing but will not always be possible, or sufficient. moreover, we fout! onbekende naam voor documenteigenschap. need to carefully guard the stability of our financial system. no - one benefits when the coronavirus crisis evolves into a financial crisis. this implies that we need to be cautious with, for instance, proposals for large - scale debt forgiveness. such proposals are only viable when financed by governments. a pan - european policy response is needed to help the hardest - hit countries. recent policy announcements offer a step in the right direction, but this crisis is clearly not one that will be solved overnight. global economic challenges in the new normal beyond the recovery phase, the coronavirus might also change the behaviour of economic agents, affecting the structure of the global economy more fundamentally. one particularly relevant example concerns global supply chains. in today ’ s world very few companies produce their products from start to finish. instead, the production process is highly fragmented and takes place all over the world. this design of the global economy has enabled companies around the world to specialise and has created efficiency gains. the coronavirus, however, also shows how vulnerable the global economy has become due to firms ’ reliance on these highly fragmented global supply