. why did central banks not see the crisis coming? in 2006 and 2007 i said – on behalf of the governors of central banks meeting in basel – that the quantity of risk and the price of risks were underestimated in global finance. spreads were very low, risk premia were abnormally meagre and volatility was very modest. this called for a market correction and we asked market participants to prepare for that market correction. you forecast the crisis? not the extent and the depth of this global crisis. but if anyone saw warning signs and voiced them, it was the central banks. how can the central banks now help to find a way out of the crisis? with rates near to zero, can you do any more than print money? the present circumstances are extraordinary. central banks and governments must therefore resort to extraordinary measures. to prevent the collapse of the financial system, we have provided the banks with an exceptional framework of liquidity providing. but citizens can have full confidence that we will guarantee stable prices over the medium and long term. the 329 million citizens of the euro area are very clever. they would not improve their level of confidence and help restarting the economy if they had the sentiment that we were forgetting our primary medium term goal. do you think that governments will be able to quickly pay off the debts they are now accumulating? we call upon the governments to do that. we support strongly the european commission in its task of ensuring the respect of the stability and growth pact in such exceptional circumstances. many people expect either a massive reduction in the value of money or tax increases – or both? are the fears justified? we are here to preserve the value of the money of our fellow citizens. they can count on us. as regards governments ’ fiscal policies they must be designed to incorporate the exit strategies to reassure people that these policies are on a medium term sustainable path. many experts, however, are worried about deflation, i. e. a lasting fall in prices. are there grounds for such fears? we should not confuse disinflation and deflation. at the moment i am speaking, we are experiencing very low inflation and in the months to come negative inflation due to the decrease of the prices of oil, energy and commodities, before it increases again at the end of the year. this is good for the purchasing power of households and is a correction of the high prices of the past. deflation means steady decrease of all prices and negative inflation expectations. this

by the entire euro area. they wouldn ’ t be bonds issued by spain, italy or germany, but by an eu institution. but this isn ’ t the only instrument we can use to defend [ against the effects of the coronavirus ], and it ’ s certainly not the most powerful. the most powerful is undoubtedly the european central bank, which is dealing with a situation, in which also some countries with weaker fiscal positions require funding, so that we don ’ t see an emergence of the bond spread problem and an increase in borrowing costs. in the 2008 crisis you were looking far ahead. everything came together in that moment during the euro crisis. four years went by before we could start to breathe freely. this time it ’ s a virus which, perhaps within a month, has been brought under control in one way or another. or in two months we might be able to breathe freely again. but never before has so much damage been done in two months. are the consequences this time going to be worse than back then? we will have to see. if this goes on for two months, there will be a recession but it won ’ t be an overly deep one. if we get to three months, it will start to become more serious. i think it ’ s important to bear in mind that, from the economic perspective, europe remains the main economic and financial shield for an economy like spain ’ s in times like these, in an emergency like the one we ’ re in now. if we didn ’ t have a central bank like the ecb acting in the interests of the entire euro area – and in the interests of the spanish economy – the funding costs of the spanish economy would be soaring. in a situation like the one we ’ re in, imagine adding a debt crisis to the public health crisis and the economic crisis. that ’ s what the ecb is preventing. so there ’ s a significant element of solidarity to this. and other things are being done too. for example, the european investment bank is going to launch a guarantee scheme. the eu budgets will start working and making purchases. the eu institutions are acting in solidarity with all of the countries, also those that are most vulnerable, like spain at the moment. 2 / 4 bis central bankers'speeches nevertheless, the spanish government is furious. when the spanish prime minister talks about europe, especially about germany and the netherlands who are putting obstacles in the way of the notorious coronabonds, he looks stony - faced