luis de guindos : the euro area financial sector in the pandemic crisis speech by mr luis de guindos, vice - president of the european central bank, at the 23rd euro finance week, frankfurt am main, 16 november 2020. * * * i am honoured to open the 23rd euro finance week. my remarks today will focus on two main issues. first, i will provide an overview of the current economic situation in the euro area, and focus on how the pandemic has amplified existing vulnerabilities in the financial system. and second, i will highlight the important role that financial regulation and prudential policy have played in response to the pandemic so far, and argue that further policy measures are needed. an uneven recovery across sectors and countries increases the risks of fragmentation the pandemic crisis has put great pressure on economic activity, with euro area growth expected to fall by slightly less than 8 % in 2020. while the gradual relaxation of social distancing measures created a strong yet incomplete rebound in economic activity in the third quarter, that recovery started losing momentum. the tighter containment measures recently adopted across europe are weighing on current growth. with the future path of the pandemic highly unclear, risks are clearly tilted to the downside. economic uncertainty is being augmented by geopolitical risks, such as the possibility of a no - deal brexit. while its impact on the euro area economy should be contained, such an outcome could amplify the macro - financial risks to the euro area economic outlook. on the upside, news about a potential vaccine fosters hope of a faster return to prepandemic growth levels. the severity of the pandemic shock has varied greatly across euro area countries and sectors, which is leading to uneven economic developments and recovery speeds. countries more heavily affected by the coronavirus crisis and the associated containment measures suffered the sharpest falls in economic activity in the first half of 2020. and growth forecasts for 2020 also point towards increasing divergence within the euro area. the recent european initiatives, such as the next generation eu package, should help ensure a more broad - based economic recovery across various jurisdictions and avoid the kind of economic and financial fragmentation that we observed during the euro area sovereign debt crisis. the economic impact of the pandemic is highly skewed at the sector level. consumers have adopted more cautious behaviour, and the recent tightening of restrictions has notably targeted the services sector, including hotels and restaurants, arts and

our non standard measures – the full allotment of liquidity at fixed rates, the covered bond purchase programme and the securities markets programme – to be commensurate to the market disruption, in order to improve the transmission of our monetary policy. bis central bankers ’ speeches some german central bankers say that the ecb ’ s actions have taken it to the limit of what is defensible, while others say that it has overstepped this limit. we are entitled to use all of the instruments mentioned, since the transmission of monetary policy is at risk if interest rates for “ risk - free ” monetary and financial investment instruments in the individual euro area countries are hampering our monetary policy. at the same time, we have always made it clear that financial stability is the responsibility of governments. we had to intervene – for monetary reasons – only because for a long time governments did not take their responsibility for ensuring financial stability seriously. have we perhaps gone too far as regards our monetary policy? to answer that, we should look at the policy rates of other currency areas, such as japan or the united states, which are much lower than ours. any comparison with other important advanced economies ’ central banks shows that we are actually very prudent in our application of non - standard measures. but is that also true of the non - standard measures? again, the comparison is simple. look at the evolution of central banks ’ balance sheets since the start of the crisis. our balance sheet has increased by around 80 %. on the other side of the atlantic, the equivalent balance sheet has grown by 226 %. none of us can ignore the crisis. drawing on the ideas of the great german thinker max weber, i would say that we have to rely on both the ethic of conviction, which i associate with the interest rate measures, and the ethic of responsibility, which i associate with all the non - standard measures. and we have to do that in a highly responsible way. that being said, did you know that in my own country i was called the “ ayatollah of the strong franc ” and “ tietmeyer ’ s clone ”? you must admit that you find that flattering. it was meant as very harsh and serious criticism by some in my home country. on the other hand, there are also those in germany who are not critical. i was awarded the karlspreis in aachen and the global economy prize in kiel. this was a very great