very strong, but a significant part was also for financial activity. there was a general increase in gearing in the corporate sector, as boards worried that they could be seen as having lazy balance sheets, making them takeover targets for private equity. over the four years to 2008, the gearing ratio of the corporate sector rose from around 60 per cent to over 80 per cent ( graph 8 ). graph 8 the global financial crisis brought a change in thinking by both businesses and their lenders, and there has been a sharp slowing in business credit. over the past year, business credit has fallen by about 4 per cent. this has not translated to a sharp weakening in economic activity, as was the case in the early 1990s, because a shift is taking place in the way businesses are funding themselves. helped by the pool of funds that has been built up through the superannuation system, businesses were able to raise substantial amounts of equity when debt markets dried up during the financial crisis. most importantly, however, internally generated funding from profits has also been very strong. as such, the total availability of funds to businesses has continued to increase at around its long - run average rate ( graph 9 ). graph 9 these shifts in funding patterns mean that movements in credit, by themselves, may not give an accurate picture of the overall availability of funds to businesses. the trends that we have observed recently are not evenly spread through the business sector. the mining sector has made heavy use of internal funds while the property and infrastructure sectors have relied much more on debt. i will say more about these sectoral issues later. while the small business sector is often the focus when people worry about the availability of credit, the recent cycle in credit to small business has not been as severe as that in credit to large business ( graph 10 ). growth in credit to the small business sector through the boom years was more restrained than the run - up in credit to the large business sector, and credit outstanding has held up better since. over the past six months or so, credit to small business has grown at an annual rate of about 8 per cent. graph 10 property financing given the obvious interests of this group, let me end by looking in more detail at property financing. property - related lending accounts for a very significant share of the business lending undertaken by banks and other lenders. it also tends to be among the most cyclical components of lending, rising strongly during boom periods and then contracting sharply. it is also a component of

culture of stability, was chosen as a founding model for the eurosystem. an independent central bank is necessary for stable prices, but more than that is needed. price stability is also jeopardised by unsound public finances. if public finances get out of hand, the central bank can come under overwhelming pressure to jump to fiscal policy ’ s rescue and, in so doing, can undermine its primary objective of price stability. this lesson is not just derived from theoretical models, it has been evidenced time and time again in the past. a particularly good example from history is the latin monetary union comprising italy, france, belgium, switzerland and greece. even before the treaty of union came into force, italy ’ s debt exploded owing to the war with austria. on 1 may 1866, the government took out a loan with the banca nazionale to finance this debt for which italy departed from the bimetallic standard and imposed an enforced rate of exchange for its bis central bankers ’ speeches banknotes. this enforced monetary financing of war debts triggered the first severe crisis of the latin monetary union and fuelled a permanent mistrust between the member states. the recent past – notably the financial crisis – also has important lessons for monetary policy. one example is asymmetrical monetary policy, which provides strong counter - measures when speculative bubbles burst. this can inflate the risks for financial stability. in an environment where market participants can pocket the full return on a risky investment if it is successful but only have to bear part of the costs if it is unsuccessful, risk appetite can take on a harmful dimension for the economy. when considering the future role of monetary policy and its relation to other policy areas, we do not have to go back to the drawing board but can draw on a wealth of experience and economically proven evidence. this we can do, and this we should do. although the outstanding political significance of the monetary union was – and still is – undisputed, a political project must also be economically sustainable ; in the long term, it cannot be enforced against economic conditions. economic mechanisms, such as the risk of moral hazard, may not be laws of nature ; however, they are relevant constraints which politicians cannot ignore forever. thus, in order to overcome the crisis and to prevent it from happening again, it is essential to apply a coherent approach : the short - term emergency measures and institutional changes must not stand in the way of the long - term stability objective. and the interaction between