lehman brothers which threatened to produce very adverse economic outcomes with strong reductions in output, deflationary spirals and high unemployment, we made a series of policy rate cuts. these limited the consequences the downturn could have had on the income of households and firms across the euro area. our more recent rate cuts have narrowed the interest rate corridor between the deposit rate and our main policy rate to 50 basis points. these rate cuts have further eased the financing conditions of borrowers in the euro area and they have contributed to a decline in the crosscountry heterogeneity in funding costs. banks from stressed countries which participate most in eurosystem liquidity - providing operations will benefit from the lower interest rate charged for these operations. this will, over time, translate into reduced financing costs and improved access to credit for households and firms in stressed countries. second, apart from standard monetary policy, the ecb has also resorted to a number of nonstandard measures. by re - directing credit to those segments where financial intermediation ceased to function, the non - standard measures supported those areas most in need and thereby countered the increasing heterogeneity. the announcement of outright monetary transactions ( omts ) in particular has played a crucial role : it has improved the transmission of monetary policy by removing the “ tail risk ” arising from redenomination concerns in certain euro area countries. see m. brunnermeier, and y. sannikov, 2012. “ redistributive monetary policy ”, paper prepared for the 2012 jackson hole symposium, princeton university. see b. coeure, 2012. “ central banking, insurance and incentives ”, speech at the ecb conference on “ debt, growth and macroeconomic policies ” frankfurt, 6 december. bis central bankers ’ speeches overall, while our non - standard measures were designed for the euro area as a whole, their use has varied among counterparties and across countries. in this regard, our non - standard measures restored the distributional neutrality of our monetary policy by mitigating distortions in certain stressed asset classes or sectors. their impact has prevented very adverse economic outcomes for certain sectors and countries, and because of the effect this would have had on the rest of the euro area, it has thereby also supported medium - term price stability in the euro area as a whole. today we are clearly seeing signs of improvement in financial conditions. spreads in sovereign and corporate debt markets have fallen substantially. deposits placed by the euro

. placing greater weight on the long - term sustainability of public finances sounds reasonable ; however, this provision should not be used as a “ back door ” for introducing all kinds of exceptions. discriminating between good and bad types of expenditure is of no help either. i have serious misgivings about any endeavours to loosen the obligation to trim excessive deficits in a speedy manner and about tolerating excessive deficits in periods of economic stagnation or low growth. overall, the debate on reforming the stability and growth pact has the air of reshaping the rules to fit current fiscal practice - instead of reshaping fiscal practice to fit the pre - agreed rules. basically, the proposals now under discussion amount to substituting discretion for rules. the implications of this paradigm shift must be borne in mind : heightened complexity, reduced transparency, and discarding the principle of equal treatment. abandoning rules in favour of discretion would represent a major step backwards. emu was once meant to be placed on a solid institutional foundation instilling credibility. rewriting the pact as envisaged would deal another blow to the credibility of the fiscal framework of the monetary union. from the viewpoint of a monetary policymaker committed to stability, the envisaged change to the nature of the stability and growth pact would not yield any major benefits. it could, however, come at a great cost. 4. fiscal policy and structural reforms the growth policies agreed on in the lisbon agenda are, amongst other things : • the completion of the internal market, • stimulating competition and deregulating the product markets, • reforms improving flexibility in the labour market, • generating a climate conducive to entrepreneurial activity, to research and development. i very much support this agenda. i do, however, not support proposals which, with reference to the lisbon agenda, suggest that expenditure related to growth policies should be disregarded when calculating the deficit. in my, view, using the lisbon agenda as an excuse for weakening the stability and growth pact amounts to upending conventional economic wisdom. the correlation between debt and deficits, on the one hand, and economic growth, on the other, is negative. never in economic history have spendthrift policies produced sustainable growth. the opposite is true, and all the more so as all european countries have to brace themselves for sharply rising fiscal costs resulting from the pending demographic shift in an ageing society. loosening budgetary discipline is no viable option for promoting economic growth. on the