That includes ensuring that our monetary policy feeds through to all sectors of the economy and to all countries, and heading off any financial fragmentation problems like those experienced in the past. In short, we stand ready to adjust all our instruments as necessary. On the supervisory front, the banking sector must clearly tackle this crisis from a healthier position than in the previous crisis. In any event, we should continue to be doubly watchful. First, over banks and financial markets, so they continue to smooth the flow of financing. And second, over the risks to financial stability. Regarding the first objective, beyond the role of monetary policy, we supervisors have enabled banks to make use of the capital buffers available and the Government approved a public guarantees programme for loans to firms that has softened financial intermediaries’ reluctance to incur higher risks in circumstances such as the present. All these measures have been effective. The latest data for April show a year-on-year rebound of almost 90% in the flow of new lending granted by banks to firms. In any case, the information analysed by the Banco de España shows that small firms and those most affected by the crisis might have difficulty gaining access to financing, especially in the absence of public support instruments. In turn, incentives must be gradually restored so that financial resources may be reallocated to those firms and sectors that can most contribute to the recovery in activity and employment.
The Banco de España projections include a third scenario, in which the materialisation of some of these risks might give rise to a decline in GDP for this year of 15%. 3. Economic policy in the second phase of the crisis The key magnitudes of these forecasts illustrate the challenges we face and the need to formulate a forceful economic policy response. I shall now turn to detailing the main elements which, in my view, this response should include. As earlier stated, in this second phase of the crisis economic policy should combine two objectives: to support the recovery and provide for the structural adjustment of the economy. First, I shall broach the policies relating to the monetary and financial areas. As part of the European Central Bank (ECB), the Banco de España contributes to such policy decisions at the European level. Here the priority should continue to be to support the recovery and maintain financial stability. As mentioned in my previous testimony to the Economic Committee, I believe we should all share the goal of preventing the current crisis from being  3  accompanied by a generalised tightening of financing conditions or from seriously harming our financial system. In this connection, and in relation to monetary policy, we have on the ECB Governing Council reiterated our commitment to doing everything needed to support euro area citizens in these extremely difficult times.