will probably stay well below the record high levels of 2003 and 2004. and the resulting loss allowances are likely to be manageable overall for the banking sector. 3 public finances the fact that the economic slump last spring has not had any more serious repercussions so far, or even precipitated a downward spiral, is due mainly to the decisive intervention by ﬁscal policy. fiscal policy is playing a leading role in managing the economic fallout from the crisis, as it can provide direct ﬁnancial support to the affected enterprises and workers. in this context, the high level of uncertainty and fast - moving infection rates mean that both the containment measures and the assistance measures need to be adjusted time and again. but after the pandemic, it will be vital for government to roll back its inﬂuence over the economy and allow private drivers of growth to take hold once again. care should be taken to avoid changing expectations of the role of government, as this would serve to weaken rather than strengthen the innovative forces in our market economy. furthermore, many are concerned that the german state could be overextending its resources with its coronavirus assistance measures. it is true that, according to our december forecast, the debt ratio – i. e. government debt in relation to gdp – is likely to have risen very sharply to around 70 % in 2020. that said, during the global ﬁnancial crisis, the debt burden even peaked at 82 %. the german state has [UNK] ﬁnancial leeway, thanks, in part, to the very favourable starting position of its public ﬁnances. after the pandemic, however, it will be a matter of returning public ﬁnances to a sound footing, as germany will face further ﬁscal challenges over the longer term. for example, additional expenditure for education, climate protection, and the digital transformation is on the horizon. moreover, there will also be increased spending on pensions, healthcare, and long - term care due to both political decisions and demographic change. 5 / 13 and, lastly, a lower debt ratio would also be important for government to be well prepared again ﬁnancially to face a potential future crisis. at this juncture, we do not expect the need for consolidation to be exceptionally high. it should, moreover, be possible to spread the consolidation appropriately across the economic recovery process. to this end, central government will have nearly €50 billion worth of reserves at its disposal for the transitional period

andreas dombret : deutsche bundesbank ’ s 2012 financial stability review – the risks to the german financial system speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the presentation of the deutsche bundesbank ’ s financial stability review 2012 “ the risks to the german financial system ”, frankfurt am main, 14 november 2012. * 1. * * risks : an overview the risks to the german financial system remain high. for a number of years now, we have seen the risk situation being shaped by the development of the financial and debt crisis. i do not expect these factors to decouple in the near future. that is why the european sovereign debt crisis remains the greatest threat to financial stability in germany. at the same time, the risk map will need to be redrawn, as monetary and fiscal policy measures on a massive scale were needed to stabilise the financial system. this has entailed an ever greater transfer of risk to the public sector and has caused the low - interest rate environment to become entrenched. the side - effects of short - term stabilisation measures can leave a difficult legacy for financial stability in the medium to long term. that is why we need to make a distinction between acute risks and medium - term risks. acute risks are like a rear - view mirror in which the financial and sovereign debt crisis is visible. acute risks are located primarily in the legacy portfolios of asset - backed securities and sovereign risk in the context of the sovereign debt crisis. medium - term risks, meanwhile, require us to look ahead and consider what might be around the next corner. preventive macroprudential oversight has to take medium - term risk factors very seriously. its task is to promptly identify potentially unhealthy developments that might unfold and endanger financial stability in the future. today, we can see a growing number of the risk factors that played a role in the run - up to the financial crisis. the financial stability review 2012 addresses three topics : • first, the entrenched low - interest rate environment. this is spurring the search for yield. • second, real estate prices. these are showing accelerated growth in germany ’ s urban centres. the experiences of other countries show that precisely such an environment of low interest rates and high liquidity can encourage exaggerations on the real estate markets. and this can pose a considerable threat to financial stability. • lastly, the global shadow banking