timely, given the subpar performances of many caribbean economies in the wake of global economic and financial crisis. i am confident that finding the right mix of solutions to these challenges we face is within our reach, notwithstanding the structural rigidities imposed on our economies associated with small size, the high degree of openness to external trade and financial shocks, as well as the destructive effects of natural disasters. as you are all aware, barbados is currently in the process of implementing a home - grown programme of renewal and transformation supported by an extended fund facility arrangement with the imf. therefore, i am sure we will be listening intently not only to the nature of the challenges, but also the viable opportunities and solutions that may be pursued to enhance our economic circumstances. in closing, it would be remiss of me if i didn ’ t mention that sir alister mciintyre, a distinguished 1 / 2 bis central bankers'speeches regional academic, development economist and statesman in his own right, was the first coordinator of the regional programme of monetary studies and fate would have it that his son is delivering this distinguished lecture in the 50th year of that ground breaking programme. it appears the stars are aligned for what is expected to be a stimulating and provocative lecture. therefore, without further ado, i invite our distinguished speaker dr. arnold mcintyre to address you. 2 / 2 bis central bankers'speeches

, the lengthening of the maturities of long - term refinancing operations. • fourth, the provision of liquidity in foreign currencies. • and finally, financial market support through outright purchases of covered bonds in order to stimulate a market that has traditionally been an important source of funding for banks. this is the only decision we have taken which directly affects a market segment other than the money market, and the total sum allocated to the programme – €60 billion – may appear modest compared with asset purchases performed by some other central banks. our planned purchases amount to about 5 % of the eligible outstanding covered bonds. let me emphasise that we have very deliberately refrained from buying government bonds, so as to safeguard our independence from political influence. for the same reason, we have implemented our measures without any form of government guarantee. the implementation of the non - standard measures has led to a significant increase in the size of the eurosystem balance sheet. by the end of august 2009, the simplified balance sheet of the eurosystem stood at around €1, 500 billion – about 16 % of euro area gdp. compared with its size in july 2007, shortly before the outbreak of the financial turmoil, the balance sheet is currently about two - thirds larger. it is difficult to assess the impact of our measures precisely, but we are satisfied that spreads in the money market have declined significantly since last autumn and are now back to the levels seen before the bankruptcy of lehman brothers. together with the policy rate cuts, this has contributed to a substantial decline in lending rates to households and firms. for example, the interest rate offered by monetary financial institutions ( mfis ) on loans to households for house purchase with a floating rate and an initial rate fixation of up to one year has about halved since october last year. the subdued developments in lending have attracted some attention, particularly given that our measures were designed to support lending activity. however, if we consider how credit has developed during economic downturns in the past, the recent developments in credit appear to be broadly in line with the recent developments in economic activity and the current outlook. in particular, in the past loans to firms have tended to lag turning points in the business cycle. one explanation for this may be that firms tend to use their own funds first and only afterwards resort to external financing, which leads to low demand for credit around the turning point. based on past experience, the current levelling - off of loans to households