in response to the financial shocks, which would have greatly complicated the response to the crisis. second, the existence of emu, by supplying a common currency, a common liquidity policy across europe, a forum in which the issue of coordinating economic policies can be more effectively discussed and solved, is also crucial. in the immediate aftermath of the crisis, the ecb was quick and flexible to respond to the challenge posed by the drying - up of market liquidity. the eurosystem ’ s operational framework has proved adequate to allow rapid and far - reaching decisions and a timely management of the initial stages of the crisis, and flexible enough to deal with the evolving situation, smoothly incorporating any required amendments. we have increased the amount of liquidity provided, lengthened the maturity of operations, set up a facility to offer liquidity in dollars in agreement with the fed. in the last weeks, we stepped up our effort to normalize the dislocated money market, by deciding some further, and more profound, changes to the operational system. we have narrowed the corridor of monetary policy, shifted to a fixed rate tender with full allotment and enlarged the collateral that can be used by participants. we do not have a counterfactual, but i would argue that some of the pre - emu national systems would have been put to a hard test by the recent events. the existence of a common liquidity policy proved effective in avoiding that uncoordinated national initiatives open the way to cross - border arbitrage and to undesired spillovers that could have further amplified the turbulence. more generally, in the presence of a systemic crisis and with closely integrated financial markets, the appropriate policy response needed to be coordinated, not only across european borders, but also beyond the euro area. the unprecedented policy move decided jointly by the main central banks of the world on 8 october is a case in point. coordination on such a scale may have been very hard in the old days. finally, the worsening of the turmoil since the beginning of september posed new challenges to policy makers of the euro area, calling for prompt action. at first, the severity of the crisis induced some national governments to take autonomous steps to restore confidence, but this proved insufficient, signaling very strongly the need for a coordinated action at the european level. the agreement of october 12 on a concerted european plan of action setting the guidelines for interventions aimed at restoring confidence in financial markets has been a fundamental step in the management of

levels and resorted to unconventional expansionary measures ; governments used their budgets to support the financial system and sustain demand and employment. these measures will have to be gradually phased out. as we emphasized at the last meeting of the governing council of the european central bank, the current level of official interest rates in the area is appropriate ; no medium - term risk of inflation has emerged. the eurosystem ’ s operations to support liquidity and banks ’ lending capacity are continuing. nevertheless, the unconventional measures that are no longer necessary thanks to improved financial market conditions are being gradually discontinued. in december, we announced that the main refinancing operations with twelve and six - month maturities would not be repeated beyond december and march, respectively. the exit from the current set of unconventional monetary policy measures should not be premature so as not to hinder recovery, but neither should it be tardy so as not to put price stability at risk and so as to avoid fuelling market distortions and speculative bubbles that would constitute the premises for new crises. at the beginning of march, we will take further decisions on the phasing out of the extraordinary operations, considering the prospects for price stability. the demand on the part of banks which may have difficulties raising funds can be satisfied without affecting monetary policy. as of now, it would appear necessary to normalize budget policies, at least by drawing up clear exit paths. the international monetary fund estimates that since 2007 in the leading advanced economies there has been a five - fold increase in the deficit, from 2 to 10 per cent of gdp. it also forecasts that budget deficits in the euro area will still be more than 3 per cent of gdp in 2014. in recent weeks, the state of the public finances in greece has alarmed the international financial markets. if the greek government adjusts its budget with determination, with careful monitoring by the european commission and the ecb, the markets will subscribe new securities as old issues fall due, as happened in italy at the beginning of the 1990s. it is nevertheless important that the euro - area countries have expressed their intention, should it prove necessary, to take decisive and coordinated action to ensure financial stability within the area. the public finances in many countries will be increasingly burdened in the coming years by costs associated with population ageing and climate change. a prompt and credible indication of the ways to correct the trend of the public debt is needed, among other things to reduce volatility in the financial markets and the issue