But it will be hard for the recovery in the second half of 2020 and 2021 to make up for this year’s downturn. Is the ECB’s current monetary policy sufficient to deal with the economic impact of the coronavirus (COVID-19), or can we expect additional measures soon? We have taken a number of key measures. In terms of monetary policy, our response to the situation has been very active, with three types of measure. First, we have provided liquidity to the banks, adjusting the rules on collateral for accessing liquidity-providing operations. European banks therefore have more liquidity at their disposal and at more favourable conditions. Second, we have responded with the measures taken by the ECB Banking Supervision. To avoid a credit crunch, we have eased the requirements on capital held by European banks, the classification of non-performing loans and the accounting rules. And third, we have launched the € million Pandemic Emergency Purchase Programme (PEPP), which will increase the total assets purchased by the ECB to € trillion in 2020. This is a large sum in order to maintain financial stability in the debt markets, in particular in the government bond markets, and to safeguard the monetary policy transmission mechanisms. In addition, of course, we have the fiscal policies of national governments and the European Commission, as well as the decision by the Eurogroup last week.
However, ensuring that the payment system functions efficiently is also a fairly general definition that requires further precision. To become more specific, it is necessary to define what characterises an efficient payment system. I intend to discuss two characteristics here that I perceive to be the most central – price stability and financial stability. Price stability An important component of an efficient payment system is that economic agents have confidence that the value of the means of payment will remain stable over time, that is in practice that inflation will be low and stable. One usually expresses this as there being a nominal anchor that prevents inflation and inflation expectations from drifting off. If households and companies are confident that the general price level will not change very much, they are better able to plan for the future and need not put effort  1  See, for instance, Santomero, A.M., S. Viotti and A. Vredin, (2001), "Challenges for Central Banking: An Introduction”, in Santomero, A.M., S. Viotti and A. Vredin (ed. ), Challenges for Central Banking, Kluwer Academic Publishers. BIS Review 52/2006  1  into finding ways of protecting themselves against inflation, but can focus on more productive activities. Another argument for keeping inflation low focuses on the role of price formation as a signalling system. When inflation is low and stable it is easier for economic agents to distinguish changes in relative prices and to adjust their decisions regarding consumption, saving, work and investment accordingly.