. i warmly welcome the proposal : in the absence of the “ quantum leap ” towards an eu budget, which could finally be financed by borrowing, this is the best political response that germany ’ s leaders could have given to those who doubted their commitment to the euro. and it raises the prospect of a european policy mix that is finally better balanced and that does not place excessive strain on monetary policy alone : the nordic countries, which are often the most sensitive to this balance, should therefore support this principle. act ii, which is currently unfolding, is one of a gradual but uneven exit from lockdown depending on the sectors or the countries involved. we will only provide our first estimates for 2020 and 2021 on 9 june but we already know that act i – general lockdown – cost the french economy almost 6 percentage points of lost annual gdp and that act ii could lead to further losses of at least half this. over the longer term, it is difficult to foresee the time needed to return to normal – or to a “ new normal ” – and some lasting potential growth losses are to be feared. in short, we have to face up to an unprecedented shock to both supply and demand, that is temporary and in part long - lasting, and symmetrical but also asymmetrical in terms of some of its national impacts. intermediate objectives in terms of monetary policy, the context and its uncertainties have increased the need to meet several intermediate objectives at the same time. to achieve the primary objective of price stability, as christine lagarde simply and clearly put it, “ the ( effective ) transmission of monetary policy is just as important as monetary policy itself ”. and this transmission applies towards all economic players, along all financing channels, and in all countries. 3 / 5 bis central bankers'speeches thus, as early as the critical phase in march, it was already essential ( i ) regarding interest rates, to support favourable financing conditions and to contain the adverse effects of strains on the financial markets, ( ii ) regarding volumes, to guarantee sufficient liquidity for business and households through bank channels, and lastly ( iii ) to limit the risks of financial fragmentation within the euro area. when we need to meet several intermediate objectives at the same time, we need to expand our range of instruments and strengthen their intensity. here, economists often refer to the “ tinbergen principle ”, but it does not necessarily require strict specialisation with one single instrument assigned to each objective. our choice at the ecb is

adjustment instrument. our new instruments to cope with the crisis this is why the ecb introduced new instruments in addition to those already available, which are more flexible in dealing with an unprecedented and multifaceted crisis. the supply of liquidity to banks has been reinforced in terms of quantity and, above all, through an incentivising price structure. interest rates on tltroiii operations were cut dramatically on 12 march and again on 30 april and are now, at – 1 %, 50 basis points below the deposit facility rate for any bank that maintains the outstanding amount of its lending to the economy. this is a radical – and yet largely unheralded – innovation that represents several billion euro in support to the european banking sector each year. above all, we have created the eur 750 billion pandemic emergency purchase programme ( pepp ). while it was its size that impressed, its greatest innovation lies 4 / 5 bis central bankers'speeches in its exceptional flexibility in terms of time, volume and allocation between countries and asset classes. it is its very flexibility that should make the pepp our preferred marginal instrument for dealing with the consequences of the crisis, and i would now like to expand on its components. first, flexibility in terms of time. we are not bound by a monthly allocation. and the programme is clearly intended to be temporary : the governing council “ will conduct net asset purchases under the pepp until it judges that the coronavirus crisis phase is over, but in any case not until the end of this year [ 2020 ] ”. there is a risk that the economic consequences of the crisis may continue beyond the end of 2020, possibly justifying an extension to the pepp ; i then believe it would be advisable for us to clarify the criteria, “ state - dependent ” on the economic situation, upon which we will base our decision to close the programme in the future. second, flexibility in terms of volume. unlike the pspp, we are not committed to a fixed amount – today, the pepp can go “ up to eur 750 million ”, and we stated on 30 april that we were prepared to go further if need be. however, in my opinion this would only make sense if at the same time we ensure the maximum effectiveness of the pepp. and this brings me to my third point, flexibility in terms of allocation between countries. while there is a risk that the effects of the crisis may in some cases be asymmetric,