), driven by worsening confidence in industry, services, retail trade and construction, and among consumers. 22. industrial production ( excluding construction ) decreased sharply ( by 1. 8 % month - on - month ) in march and currently stands 0. 6 % below the level it reached before the pandemic ( in february 2020 ). euro area gdp growth in the first quarter of 2022 was 0. 3 %, and while there were growth spikes in a few countries, in major economies gdp growth either slowed ( spain ), halted ( france and the netherlands ) or contracted ( italy ). in germany growth momentum is low and weakening according to destatis, which emphasised that “ the economic consequences of the war in ukraine have had a growing impact on the short - term economic development since late february ”. 23. panetta, f. ( 2022 ), “ europe ’ s shared destiny, economics and the law ”, lectio magistralis on the occasion of the conferral of an honorary degree in law by the university of cassino and southern lazio, 6 april.

average weighted maturity could be kept short to limit the impact of the portfolio on the monetary policy stance or to reduce central banks ’ exposure to duration risk. in the euro area, however, there are two additional considerations relevant for the assessment of whether a large bond portfolio is desirable or not. one is that the lack of a consolidated public sector balance sheet raises more fundamental concerns about monetary and fiscal interactions in a currency union with sovereign member states. these concerns may potentially undermine the credibility and independence of the central bank. if central banks need to raise interest rates sharply to protect price stability, this implies significant risk exposures for central banks and may have implications for government budgets. [ 22 ] in addition, large central bank ’ s sovereign bond holdings may distort the price information of underlying risks in the euro area. second, a large bond portfolio may affect liquidity conditions in financial markets. in recent years, the eurosystem ’ s footprint in financial markets has contributed to a significant “ scarcity premium ” that market participants must pay to obtain bonds bought under our asset purchase programmes ( slide 16, left - hand side ). such scarcity effects can put the smooth functioning of financial markets at risk, especially when the demand for safe assets increases in periods of stress. these effects tend to be larger in the euro area than in the united states, given the euro area ’ s substantially lower volume of outstanding highly - rated and liquid bonds ( slide 16, right - hand side ). central banks have tools to partly alleviate such distortionary effects. the eurosystem ’ s securities lending facility, for example, channels bonds bought under our purchase programmes back into the market, improving liquidity. but the larger the portfolio, the less likely it is that liquidity conditions remain unaffected. this could risk undermining our obligation to act in accordance with the principle of an open market economy where prices and quantities are determined by competitive market forces. giving banks the liquidity they demand the second approach has the potential to alleviate some of these trade - offs by allowing banks themselves to determine the amount of liquidity they want to hold. this is broadly the approach the bank of england first announced in 2019 and implemented in 2022. under this approach, the central bank offers regular collateralised lending operations to ensure that any shortfall in banks'demand for reserves is replenished as quantitative tightening proceeds ( slide 17 ). that is why the bank of england ’ s approach is referred to as a “ demand - driven ” floor