the likelihood of a recession has thus risen considerably. what is your expectation for economic growth? our latest projections put euro area growth at 0. 8 % for this year. but that is now out of date. we will certainly have to adjust our projection significantly downwards. below 0 %? we don ’ t know yet. the greatest uncertainty is how long the crisis will last. originally, many economists thought that there would be a short, sharp crisis and that things would subsequently pick up again quickly. it very much depends on how quickly the spread of the virus can be contained, but also on the economic policy reaction. you have done intensive research on financial crises of the past. is there any crisis that was similar? the current situation cannot be compared with the 2008 financial crisis. that crisis originated in the financial system. today we are looking at a shock to the real economy that is affecting many countries at the same time and for that reason is so devastating for the global economy. if we want to draw a comparison, we should look at other pandemics. the spanish flu? yes, for example – that pandemic was indeed devastating. the precise figures are not known, but between 20 and 100 million people died back then. now we are in a much better situation. first, medicine is much more advanced. during the spanish flu pandemic, many people died from secondary bacterial infections which can now be treated more effectively. and we are economically in a much better position to deal with a shock of this nature. why? the internet puts a whole range of technical options at our disposal that allow us to continue working. our social security systems are much better. people will only stay at home if they continue to be paid when they get sick. at the same time, there is now more international division of labour than there was back then, so we feel the impact more strongly if supply chains break down. the economy is estimated to have contracted by 6 % at the time of the spanish flu. is this 3 / 4 bis central bankers'speeches virus crisis economically less bad? no - one can say, but we will play our part in containing the economic consequences of this crisis. 4 / 4 bis central bankers'speeches

peter praet : adjustment and growth in the euro area speech by mr peter praet, member of the executive board of the european central bank, at the european business summit, brussels, 16 may 2013. * * * i would like to thank jose marin arcas for his contribution to the preparation of this speech. introduction thank you very much for inviting me to speak at this conference of the european business summit. the theme of my address today is “ adjustment and growth in the euro area ”. this is a title that, to some, may sound contradictory. many of you will have come across commentators who claim that adjustment is in fact inimical to growth ; and that consolidating government budgets while introducing structural reforms is the main cause of our current difficulties. yet, in my view, this is a short - sighted assessment. while it is clear that fiscal consolidation has affected economic activity in the euro area in the short - term, it does not follow from this that adjustment and growth are incompatible. restoring the sustainability of public finances and implementing well - designed structural reforms are key to restoring confidence. measures that are now being undertaken help to lay the foundations for future growth and bring back a climate of confidence already in the short - term. first, by prioritising fiscal consolidation, euro area countries can anchor medium - term expectations about public debt sustainability, which is essential to support confidence among investors and taxpayers. as many euro area countries already have high public debt levels, and some have seen their market access threatened, credible fiscal consolidation ensures that debt can be refinanced at affordable rates in the future, and fiscal crises avoided. moreover, if consolidation is focused to the greatest extent possible on unproductive expenditure items rather than those, like investment, that are conducive to long - term growth, the negative effects on growth can be contained. second, by implementing structural reforms, euro area countries should raise their future growth potential. research has shown that a comprehensive package of product and labour market reforms could significantly increase euro area output – by more than 4. 5 % over 5 years, according to a recent imf study. this improved outlook, when incorporated into medium - term expectations, should encourage forward - looking firms to increase investment, and could hence lead to higher growth also in the short - term. such reforms should be undertaken with due protection of the most vulnerable members of society. the key point is that for adjustment and growth to be mutually supportive, the commitment to