which protected millions of jobs. between march and may alone, euro area banks extended €245 billion of credit to firms ( see left chart slide 5 ). this pace of credit creation was unprecedented. our targeted longer - term refinancing operations ( tltro iii ) have been designed with a view to safeguarding the bank lending channel beyond the lifeline that banks had granted to firms and households in the early days of the crisis. these operations provide strong financial incentives for banks to maintain their lending to the real economy by offering funding at rates as low as - 1 % to banks fulfilling their lending thresholds. the attractiveness of these operations was reflected in the large take - up of funds in june and september ( see right chart slide 5 ). we also decided on a comprehensive set of collateral easing measures to ensure the maximum use of our liquidity facilities. we now accept a much broader set of assets as collateral, including small loans to smes or even self - employed workers, and we accept them at more favourable conditions. taken together, if we had not reacted proactively and forcefully, we would now presumably be in the middle of a severe financial crisis with devastating consequences for economic growth and employment in the euro area. price and wage levels would probably have fallen significantly, running counter to our price stability mandate. our measures have complemented and reinforced the strong fiscal expansion in the euro area that paved the way for a recovery in economic activity in the third quarter of this year, which was significantly faster than widely expected ( see left chart slide 6 ). downside risks to the economic outlook from the second wave the exponential surge in new covid - 19 infections since early october has, however, visibly skewed the risks to the economic outlook for the fourth quarter of 2020 to the downside. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201104 _ 2 ~ 9afd2bf0ad. en. html 2 / 7 04 / 11 / 2020 monetary policy in changing conditions incoming data point to an inversion in the trajectory of the euro area economy. in october, the composite purchasing managers ’ index ( pmi ) fell for the third month in a row and sank back close to contractionary territory for the first time since june, mainly reflecting deteriorating sentiment in the contact - intensive services sector ( see right chart slide 6 ). against this backdrop, the governing council last week

to plan to save more and not less as a result of the pandemic, despite historically low interest rates ( see right chart slide 8 ). firms, too, have built up large precautionary liquidity buffers. their cash coverage – that is, cash and deposit holdings relative to gross interest payments – is more than four times higher than at the height of the global financial crisis ( see left chart slide 9 ). firms are likely to remain hesitant to commit funds to longterm investments for as long as the crisis persists and a vaccine has not been found. such conditions may increase the lags with which policy actions are transmitted to the real economy. these lags could become longer if higher debt eventually raised the likelihood of deleveraging to repair balance sheets and restore net worth ( see right chart slide 9 ). these considerations point towards the eminent importance of fiscal policies at times of low interest rates and high uncertainty to lift the economy out of the low - inflation, low - growth trap. interaction between monetary policy and financial stability the second challenge that monetary policy is facing today relates to potential side effects, in particular related to financial stability. the pandemic highlighted that the interaction between monetary policy and financial stability is a two - way street. in the early phase of the crisis, forceful monetary policy action preserved financial stability. our measures had a strong and immediately stabilising effect on both financial markets and the health and soundness of banks ’ balance sheets. but the lower interest rates are, and the flatter the yield curve is, the greater the risk that the sign may switch over time. this is the essence of the “ gdp - at - risk ” approach, which acknowledges the non - linear relationship between financial conditions and future economic growth. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201104 _ 2 ~ 9afd2bf0ad. en. html 4 / 7 04 / 11 / 2020 monetary policy in changing conditions while macroprudential policies are the first line of defence against the build - up of financial vulnerabilities, it is widely acknowledged that such policies offer incomplete protection. therefore, monetary policy cannot ignore financial stability risks. house prices are one example of possible side effects. they have increased considerably in recent years. there are visible signs of house price overvaluation for the euro area as a whole, especially in metropolitan areas. [ 14