prospects for continued price stability. more - prudent fiscal policies, including lower deficits, longer debt maturities, and reduced foreign - currency debt can reduce the likelihood and potential severity of financial crises. these policies make the financial positions of emerging - market governments less refer to ross levine ( 2005 ), " finance and growth : theory and evidence, " in philippe aghion and steven durlauf, eds., handbook of economic growth ( new york : elsevier ) ; and randall s. kroszner and philip e. strahan ( 2006 ), " regulation and deregulation of the u. s. banking industry : causes, consequences, and implications for the future, " unpublished paper. vulnerable to movements in interest rates and exchange rates. a reduction in the perceived risk that a government may not be able to service its debts makes changes in investor sentiment and financial contagion less likely, thereby reducing financial market volatility. maintaining progress i have argued that globalization, deregulation, and financial innovation, in part spurred by recent experiences of high inflation, have fostered currency competition that has led to improved central bank performance and, hence, the reduction of inflation worldwide. the resulting enhancement of central bank governance and credibility has allowed the development of long - term bond markets in many countries and the flattening of yield curves around the globe. i want to conclude by returning to the question of whether these phenomena are likely to persist. globalization and innovation are genies that may prove difficult to put back in their bottles. nonetheless, although i am an optimist, i would be remiss if i did not point out some risks. in particular, deregulation and global competition may be subject to change. the difficulty of reaching agreement in the doha round of trade negotiations highlights the risk of renewed protectionism and backtracking on deregulation. trade barriers and regulations are anathema to globalization and competition. barriers to the free flow of goods, services, capital, and technology would also diminish the force of innovation that has been so beneficial in the struggle against inflation. transaction taxes and administrative barriers may hinder the development and liquidity of bond markets, and much progress that is still required in many emerging - market countries on these fronts. high inflation can destroy an economy and result in enormous hardship for everyone involved, as argentina painfully experienced not long ago. the benefits achieved through more - stable prices are substantial. fortunately, economic forces have

for 2010 will not be available until after the 2010 annual report is published. breaking down the collateral pool of german institutions for 2009, the pfandbrief and other covered bonds take a larger share than within the whole eurosystem. more recent data have not been published yet. 4. eurosystem ’ s covered bond purchase programme besides the collateral framework, covered bonds were also part of the first “ non - standard ” measure of the eurosystem during the financial crisis. the covered bond purchase programme ( cbpp ) was announced on 7 may 2009 in order to stimulate activity in the euroarea covered bond market. last year, on 30 june precisely, the cbpp was completed, and it proved to be an effective policy instrument : it contributed to a decline in money market rates, encouraged banks to maintain and expand their lending to clients, helped to improve market liquidity in one of the most important segments of the private debt security market and eased funding conditions for banks and enterprises. in total, 422 different bonds were purchased : 27 % in the primary market and the remaining 73 % in the secondary market. the eurosystem mainly purchased covered bonds with maturities of three to seven years, and it intends to hold the purchased covered bonds until maturity. in terms of developments in the secondary market, the reaction of most european covered bond markets to the announcement of the cbpp was noticeable, and appears to have initiated a declining trend in covered bond yield spreads. this trend increased when the programme was launched, and ultimately, pre - lehman levels were reached. in the wake of the european debt crisis, market participants began to differentiate strongly between the issuers ’ countries of origin. in those countries where government bonds suffered the most, covered bonds also came under pressure. while bonds from core countries – such as the german pfandbrief or french obligations foncieres – remained relatively expensive, risk premia for peripheral bonds rose steeply. overall, the results of a current analysis suggest that the cbpp had a noticeable impact on euro - area covered bond secondary markets. while the german pfandbrief market had already started recovering by early 2009, ucits = undertakings for collective investments in transferable securities. the ucits directive in general is an investment guideline for insurance, investment funds etc limiting the share of assets one investor can invest in with one issuer. bis central bankers ’ speeches the announcement of the cbpp seems to have provided an important stimulus to the recovery