will not return some of the current problem countries to pre - crisis growth rates. so there will inevitably be calls for more stimulus. but we should keep in mind that the last ten years were not representative : it was a boom period, built on credit, creating ever larger imbalances. that party is now over. we need to learn the lessons from it. and the lesson from the bursting of a debt bubble cannot be to load up on more debt. these countries need reforms that undo previous excesses and re - build their economies on a more sustainable basis. this is the direction in which europe is currently heading. and there is really no alternative. there is one area, however, where i fear we are not learning the right lessons in europe. several european countries face a vicious circle where weak domestic banks cause fiscal difficulties for governments, which in turn undermines public debt sustainability and further damages banks ’ balance sheets. in the u. s., such a feedback loop does not exist, because federal institutions act as shock absorbers. they prevent local crises from becoming systemic : for example, banks can be recapitalised through the u. s. treasury and resolved through the federal deposit insurance corporation. in europe we need to look to the u. s. for inspiration in this area. this is why i have called for a european bank resolution authority. is the ecb ’ s response to the crisis swamping the world with liquidity? let me turn now in more detail to the recent actions by the ecb – in particular, the question whether the 3 - year long term refinancing operations ( ltros ) have swamped the world with liquidity. behind this question is the implication that increasing central bank liquidity always leads to distortions, be it inflation or currency volatility. but this misunderstands what central bank liquidity is. ecb liquidity is a very specific form of money. it can be used only to make payments between banks with accounts at the ecb and to meet reserve requirements. there is no automatic mechanism which converts this liquidity into loans or asset purchases. banks take such decisions based on factors like their financial strength, their risk aversion and the demand for credit by non - financial corporations and private households. so we should not make simplistic assertions about one factor leading to another. we should ask : what are we seeing in the data? looking at credit growth in the euro area, we see few signs

use of our credit operations, ensuring that our monetary policy tools remain effective even in times of severe financial market stress and against the backdrop of looming rating downgrades. of course, as the economic situation is evolving rapidly, we are constantly monitoring the situation. we remain more determined than ever to ensure supportive financial conditions across all sectors and countries to allow this unprecedented shock to be absorbed. we continue to stand ready to make further adjustments to our monetary policy measures should we see that the scale of the stimulus is falling short of what is needed. the impact of the coronavirus emergency on the european financial sector the pandemic hit the financial sector with an economic shock of unprecedented speed, scale and global scope. unlike in 2008, the current crisis did not start in the financial system. but the spread of the virus triggered a market reaction that at times rivalled the 2008 financial crisis in terms of the magnitude of price falls and volatility. the tightening of market conditions was abrupt, broad - based and, at times, disorderly. markets calmed following the announcement of forceful responses by monetary authorities around the globe. in particular, the ecb ’ s announcement of private and public asset purchases has helped to restore market functioning in many asset classes. in this challenging environment, banks ’ resilient balance sheets shielded them from the initial 2 / 4 bis central bankers'speeches cash - flow shock. recent efforts to build a stronger banking union allowed the banks to enter this crisis with healthier starting capital and liquidity positions than they had in 2008. at the end of 2019, the cet1 ratios of significant banks in the euro area stood at around 15 percent. the creation of a solid institutional set - up enabled us to take swift action to ensure that the euro area financial system continues to play its role in mobilising savings and directing funds into the real economy. in addition to the monetary policy measures i already mentioned, the ecb also took a number of supervisory measures. i will not elaborate on them now because the chair of the ecb ’ s supervisory board discussed them before this committee two days ago. these measures will release some of the buffers that were built up during the good times and help banks to continue providing financial support to households and businesses hit by the economic fallout of the pandemic. moreover, they will bring clear benefits in terms of maintaining a level playing field within the european banking sector. these microprudential measures were complemented by a range of macroprudential actions