triggered liquidity stress in related derivatives markets. an increase in initial margin requirements has greatly increased firms ’ liquidity needs, making it more difficult for some firms to hedge. this recent episode raises the question of whether margining practices, including those between the clearing member and their clients, may be too procyclical. financial markets remain vulnerable to further corrections that could potentially be triggered by an escalation of the war, or a faster - than - expected pace of monetary policy normalisation. conclusion let me conclude. sound financial regulation and greater resilience have helped the european financial system navigate both the pandemic and the economic fallout stemming from the russia - ukraine war. yet sizeable challenges remain. to address financial stability risks, we need to implement targeted macroprudential policy instruments. at the same time, amid global inflationary pressures and risks to growth, we are walking on a narrow path as we strive to deliver on our price stability mandate. but rest assured, we remain fully committed to stabilising inflation at our 2 % target over the medium - term.

have been more cautious than in the global financial crisis and, to date, phenomena comparable to those seen in the past have not occurred. in any event, the results of this exercise serve to show the systemic importance of this vulnerability and the need to be prepared to provide a sufficient, internationally coordinated response, depending on how the pandemic develops at international level. the impact on general government a system - wide scenario analysis of large - scale corporate bond downgrades, esrb technical note, 23 july 2020. during the current crisis, the activation of automatic fiscal stabilisers associated with lower tax receipts and increased cyclical expenditure ( for instance, on unemployment benefit ), along with the effect of the discretionary measures adopted by the authorities to mitigate the impact of the crisis, is leading to very significant increases in budget deficits and public debt in all countries. initially, there were also tensions in european public debt markets, which led to a sharp rise in sovereign spreads. however, the decisions of the ecb and the reiteration by its governing council of the commitment to do everything necessary to support all citizens of the euro area through this extremely challenging time, ensuring that its monetary policy is transmitted to all parts of the economy and to every country, have alleviated these tensions. likewise, the response of the european union, which has resolved to make significant public funds available to member states with which to mitigate the impact of the crisis and reactivate their economies, has also been crucial. in the case of spain, the pandemic has struck the economy at a time when the general government accounts still displayed certain elements of vulnerability. in particular, despite uninterrupted robust growth in recent years, at the end of 2019 the public sector structural deficit stood above 3 % of gdp and the public debt ratio above 95 % of gdp. moreover, according to banco de espana projections, in the next few years the budget deficit may exceed 10 %, while the public debt - to - gdp ratio may stand at around 120 %. following its initial increase, ecb and european monetary policy decisions have kept the risk premium well contained in recent months. however, looking ahead, persistently high levels of public debt would reduce the scope for countercyclical fiscal measures in response to adverse macroeconomic shocks and might even limit the economy ’ s growth capacity ; in any case, they would expose the spanish economy to a situation of chronic vulnerability to changes in investor sentiment on the financial markets. for all