##s, with a view to further steering very short term money market rates close to the minimum bid rate and also to alleviate tensions in the euro money market. first, the ecb continued to frontload the supply of liquidity over the reserve maintenance periods. this was achieved by increasing the allotment amounts in main refinancing operations ( mros ) at the beginning of the maintenance period while reducing them towards the end of the maintenance period so that the average supply of liquidity remained unchanged over the entire maintenance period. second, the ecb maintained the increased share of longer - term refinancing operations visa - vis the share of main refinancing operations, which it had gradually built up since the start of the turbulences. moreover, on 4 september, the ecb decided to renew the supplementary three and six month longer - term refinancing operations that will mature before the end of the year. this will allow the euro area banks to better plan their liquidity management over the turn of the year. third, the ecb continued to conduct usd term auction facilities ( taf ) in cooperation with the us fed and other central banks. accordingly, it provided us dollar liquidity to euro area banks, secured with eurosystem eligible collateral. this measure was adjusted in the period under review. indeed, in august 2008, an 84 - day taf was introduced to supplement the already existent 28 - day taf, however without thereby increasing the total outstanding amount of taf operations. the eurosystem ’ s collateral framework has proven robust and efficient over the years, and during the recent episode of financial market turbulence. in particular, the acceptance of a wide range of collateral contributes to the resilience of euro area financial markets. while fully preserving this feature, the ecb has – following its biennial review – incorporated some technical refinements in its risk control framework for eurosystem credit operations. these technical refinements, which were published on 4 september 2008, reflect, inter alia, improvements in the methodological framework, the assessment of market and liquidity risk characteristics of eligible assets, the actual use of eligible assets by counterparties and new developments in financial instruments. all of these refinements will enter into force on 1 february 2009. in concrete, these measures include the application of new valuation haircuts for assetbacked securities ( abs ) and uncovered bank bonds and the application of a haircut add - on for abs without a market price

through the global chain of financial cross - exposures. the continuous frontloading of aggregate demand through financial leverage came to an abrupt end. the bubble duly burst. the ensuing financial turbulence quickly morphed into a general deterioration in overall credit conditions ; and this dragged down economic activity and threatened fiscal sustainability in numerous countries. moreover, many governments had to intervene in domestic banking sectors to preserve financial stability. this resulted in a massive transfer of liabilities which in some cases overwhelmed government balance sheets. let me emphasise two issues at this stage. first, while the depth of the current crisis in europe and in other industrialised countries is unprecedented in recent history, its structure is by no means unique. for example, much of the above - mentioned evolution could be observed in the asian crisis in the late 1990s and in countless currency crises in developing economies before and since. second, from a broader perspective, the concrete manifestation of the deleveraging pressures is of secondary relevance : whether the strains show up on governments ’, households ’ or firms ’ balance sheets has important short - run distributional implications. but ultimately, they confront policy - makers with the same challenges : in the acute crisis phase, they have to promote and control the balance sheet adjustments – which are necessary – by way of policies that avoid depressionary spirals of the kind seen in the 1930s. once they succeed, economic activity will likely resume its upward trend, albeit from a lower base. at this stage, the common challenge for policy - makers is to “ re - base ” growth on a new and sustainable trajectory. and the extent of this rebasing can be substantial. for example, the latest imf world economic outlook suggests that estimates for potential output in advanced economies may have to be revised downwards by around 10 percentage points in level compared with pre - crisis trends, not to mention possible revision in trend growth rates. 2 given the exceptional size of the initial imbalance during the current crisis and limited flexibility in labour, product and service markets in the euro area, this deleveraging may well extend over a protracted period of time. source : imf world economic outlook – october 2012 ; chapter 1. bis central bankers ’ speeches a misalignment in the social contract this brings me to the second dimension of the debt crisis, which is the recognition that governments around the world have entered into long - term commitments beyond the limits of sustainability. importantly, these commitments are not necessarily the product of an explicit contract, like a bond or a