is not necessarily the case. there are long - term trends that have resulted in very low real interest rates. among other things, these trends reflect demographic ageing and declining productivity gains. a central bank cannot counter that. the banks are also a cause for concern. do they have enough capital to survive this crisis? it is imperative to prevent the crisis from spreading to the banking sector. that ’ s why measures targeting liquidity bottlenecks in firms are especially effective ; they work by warding off high levels of loan defaults at banks. we should be glad that the banks ’ capital requirements were significantly increased over the past few years. all in all, the banks are currently much better prepared for a crisis than they were before the financial crisis of 2008. but is that enough in the face of the current shock? we are indeed living through a scenario that no one could have imagined. it was therefore never assessed in a stress test – we are unfortunately experiencing it now in real time. if widespread insolvencies occured among borrowers, the banking sector would also be affected. but in many cases, the issue in the first instance is a liquidity bottleneck. that ’ s something politicians can deal with. the decisive factor is how long the crisis persists. how long can the economy withstand such a situation? 2 / 3 bis central bankers'speeches it depends on how severe the restrictions are and on how well - placed firms are to adjust to them. in some sectors, this is relatively unproblematic ; in others, for example catering, it ’ s hardly feasible. at some point, this situation will presumably become unsustainable, prompting the question as to what role the state intends to play in supporting firms. would the ecb then be able to do even more? or has it completely exhausted its scope for action? the ecb is in the comfortable position of having a large set of tools, none of which has been used to its full extent. we stand ready to take further measures if needed to fulfil our mandate. this was decided by the ecb ’ s governing council. so you really want to buy even more bonds? what effects do you envisage? we have a wide range of instruments : we have the key interest rates, we have instruments for providing liquidity to the banks and we have the asset purchase programmes. all of these instruments can be used to improve financing conditions. that is immensely important during such a crisis. the

changes in other areas damaging to the irish economy. ” unfair issue linkage was certainly a danger for the irish side in the negotiations. in the end, though, the danger was headed off, and the lenders did not attempt to force beggar - thy - neighbour policy changes in unrelated areas. with debt restructuring clearly off the table, the needed path of fiscal adjustment was pretty much a arithmetical calculation. getting the debt path back into clearly sustainable territory left little scope for discretion. the size of the government ’ s remaining cash balances at the outset of the programme helped ensure that the speed of fiscal adjustment was not excessively fast – given the accumulation of debt. interestingly, the fiscal multipliers used in the programme design held up quite well : ireland ’ s growth evolution relative to projection did not underperform that of the rest of the eu even in the first couple of years. and by mid - 2012 a growth dynamic had reasserted itself. myth 5 : “ it was the euro that did in for ireland. ” to be sure, the euro contributed some fuel to the fire in the form of low interest rates ( that encouraged borrowing ) and the removal of exchange risk on cross - border borrowing by irish banks. but the euro was not an essential ingredient in the bubble : several other non - euro countries also relied on the period of financial liberalisation and global savings glut to finance bubbles ( iceland and latvia the most conspicuous ). nothing in the euro regime prevented irish regulatory and fiscal policy from moderating this boom. when the crash came, the decision to guarantee the banks ( flawed though it was in its design – blanket coverage and in the lack of prior consultation with partners ) was underpinned by ecb liquidity support which prevented the chaotic currency depreciation which would surely have been the inevitable consequence had ireland been outside the euro area. ( of course, some depreciation of a domestic currency could have helped boost the country ’ s international competitiveness more quickly. ) partly true 2 : “ the european institutions pushed ireland into the eu - imf programme. ” an unequivocal public indication by europe that it would continue to underpin the liquidity needs of the irish banking system might well have avoided the need for a programme – but it would not have avoided the need for austerity. such an assurance was not forthcoming in the period september - november 2010. indeed, as is now well known, the ecb indicated privately in november 2010