of risks to price stability these measures will be unwound. accordingly, and finally, bearing also in mind that the health of the financial system cannot be made the ecb ’ s responsibility, one needs to be careful not to blur the responsibility of monetary and fiscal authorities in the euro area. of course, we will do whatever we judge to be necessary and appropriate to maintain price stability and contribute to the preservation of financial stability. but we will strictly adhere to these principles. in considering further easing measures, these principles have obvious implications. central banks can alleviate liquidity risks. but they cannot address the perceived solvency problems that impair the financial system. one could conceive measures to ease credit conditions by taking over some of the credit risk on commercial paper that banks currently hold. the ecb has already been accepting corporate loans as part of collateral in its regular liquidity operations. by operating through the banking sector, this has significantly contributed to providing funding to non - financial corporations – and thereby an easing of credit conditions. buying corporate debt outright would circumvent the banking sector. we have a responsibility to keep the eurosystem financially sound. this concern puts a break on how much further we can expand our balance sheet. how to solve the crisis? clearly, the challenges for resolving the current crisis remain tremendous. there is no panacea. we have made our contribution by making sure that longer - term inflation expectations have remained anchored in line with price stability and by preventing a liquidity crunch. it remains our responsibility to continue to do so. but one cannot rely solely on central bank policies to address all the consequences of the financial crisis and its fall - out on the economy. resolute action is needed to restructure, consolidate and recapitalise the banking system. specifically, action is needed to help banks support their balance sheet so as to sustain an adequate flow of credit to the non - financial sector. since last autumn, governments have provided or pledged a substantial amount in guarantees for new debt issuance by banks. in addition, they have recapitalised a number of financial institutions. the commitments to provide support are already substantial. but it will take time for the measures to be completely implemented and to show their full effects. in case these measures prove to be insufficient, they need to be complemented by further actions to address problems on the asset side of banks ’ balance sheets. to be successful in resolving the financial crisis the asset support schemes need to meet a

them. contributing to the functioning of the money market and preventing a liquidity crunch therefore has been crucial to forestall a breakdown of the transmission of monetary policy and a systemic crisis. as a consequence of our measures, the eurosystem ’ s consolidated balance sheet has grown by two thirds from summer 2007 until most recently, or by 6 % of euro area nominal gdp. to put these numbers into perspective, the size of our balance sheet has grown from 13 % of euro area nominal gdp in 2007 to over 20 % most recently. by providing unlimited funds in our refinancing operations we have ensured that banks facing difficulties raising funds in the market are always able to fulfil their liquidity needs. but we need to be realistic about what we, as a central bank, can achieve. in my view, we cannot expect to see the money market functioning the way it did before august 2007. what is certainly encouraging is that recently the volumes allotted in our refinancing operations have come down slightly. the same is true for the number of banks participating in these operations. spreads between secured and unsecured interest rates at term maturity have gone down somewhat. but they have remained high. the turnover in unsecured interbank lending, especially at longer maturities, still remains low. to be clear : the problem is not a lack of liquidity in the market. it is the lack of trust among the banks themselves. unless trust in the solvency of banks is re - established, there is hardly any chance that conditions in the money market will normalise. as already mentioned, financing conditions have not eased exactly in line with key ecb interest rates. so will key ecb interest rates have to be cut to even lower levels? in principle, even after last thursday ’ s decision the ecb could still contribute to easing credit conditions by cutting its key interest rates further. but this will not fundamentally solve the problems that have caused the financial crisis. the contrary could be the case. if maintained for an extended period of time, too low or very low interest rates might in fact aggravate them. they have the potential to weaken the incentives for banks to clean up their balance sheet of troubled assets and monitor their credit risk carefully. this in turn may reinforce the very problems that currently impair the functioning of the financial system. too low interest rates tend to foster lending to unprofitable business. this would harm the growth potential of the economy and thereby prepare the ground for ana