the medium to longer term. by so doing, we will continue to ensure a firm anchoring of medium - term inflation expectations. such anchoring is indispensable to supporting sustainable growth and employment and contributing to financial stability. the financial system and individual institutions within it must act now to ensure that a future removal of central bank support can be managed without painful “ withdrawal symptoms ”. preventive care : lessons from the crisis the overriding objective of someone recovering from a severe illness is not to suffer a relapse. unfortunately, there is no way of guaranteeing the avoidance of illness. but “ preventive medicine ” is crucial in reducing the risk of recurrence. we have to develop a new preventive framework to minimise the risk of recurrence. this framework will have both monetary policy and regulatory dimensions. “ leaning against the wind ” in monetary policy recent experience has reopened the debate about whether central banks should use interest rates to “ lean against the wind ” of asset price surges. prior to the crisis, conventional wisdom was sceptical about such an approach for three main reasons : asset price misalignments or “ bubbles ” were seen as difficult to identify in real time ; it was doubted that interest rate increases of a plausible magnitude could contain surging asset prices once these have achieved a momentum of their own ; and third, it has been argued that any damage to the economy stemming from an asset price correction can be contained by prompt and aggressive monetary policy easing. with these considerations in mind, a “ wait - and - see ” approach was seen as preferable when addressing asset price surges. having spoken on these issues in the past, i do not wish to enter into a detailed discussion of these arguments today. i only want to emphasise that recent experience has demonstrated the limitations of a wait - and - see approach. unprecedented policy action in response to the financial crisis could not prevent a sharp fall in economic activity, with all the consequences for the labour market, public finances and the society as a whole. moreover, a wait - and - see approach risks creating moral hazard. what is required is a more symmetric approach : one that leans against the emergence of asset price booms as well as dealing with the consequences of asset price busts. by encouraging more responsible behaviour on the part of investors, such an approach should make such cycles of boom - bust less likely. but substantial practical questions remain. clearly, central banks should not target, nor react mechanically to,

administered. contagion must be avoided. similarly, a global financial crisis of first magnitude requires prompt and decisive policy action, possibly of an unprecedented nature. when this crisis began, the european central bank was in the vanguard of the policy response, taking early and bold action to address financial turmoil. during the crisis, our exceptional measures – the ecb ’ s “ enhanced credit support ” – served to prevent a systemic liquidity crisis, enabled banks to continue functioning and helped to restore confidence. second, medical experience tells us that, over time, the continued administration of strong painkillers can be harmful. they can create dependence – r even addiction – or the recipients. such medicine cannot be a permanent solution. it would eventually create new problems. by analogy, the exceptional support provided by central banks to the private sector must not degenerate into long - term dependence of the private sector on such support. for that reason, the current non - standard monetary policy measures will have to be progressively phased out. enhanced credit support is not for eternity. financial institutions must prepare themselves for an eventual withdrawal, which, as i have said on behalf of the governing council, will be timely and gradual. third, looking forward, we know that “ prevention is better than cure ”. “ preventive medicine ” reduces the risk of future recurrence of the illness. recent experience has offered important insights into how public policies and private incentives can be improved so as to reduce the chances of recurrence. through preventive medicine, we must develop a fitter and healthier financial system. so let me describe in more detail : how we have administered the “ central bank medicine ” to the financial system ; how we envisage continuing the treatment going forward ; and what lessons we are drawing for the future design of a preventive framework. emergency medicine : crisis management and “ enhanced credit support ” it is natural to start with the “ emergency treatment ” that we have provided to the financial system throughout the financial crisis. the alertness of the ecb was reflected in its actions from the very moment that financial tension first emerged. in august 2007 the ecb was the first central bank to respond, acting within hours. in the ensuing months, we changed the timing and maturity of our liquidity provision, so as to support the functioning of the money market. in addition, we offered foreign currency liquidity to our counterparties. the intensification of the crisis in mid - september 2008 brought soaring credit spreads, dramatic