The “this-time-is-different-syndrome” is a powerful reminder of the dangers of complacency. One key observation is that financial crises are followed by unusually prolonged recessions in economic activity. Another valuable insight is that the fiscal and financial dimensions are closely interconnected. Fiscal imbalances can undermine the financial sector; financial sector imbalances can weigh down on the credibility of the sovereign; both can spillover into the real sector, and vice versa. The book foresaw that the massive implicit liabilities towards the financial sector accumulated by governments could result in unsustainable levels of sovereign debt. Despite the important theoretical and empirical advances to which Professor Rogoff has contributed substantially, there is still much to be learnt about the root causes, the triggers and the propagation mechanisms of crises. The major challenges for policymakers posed by the existing knowledge gaps are reflected in the very controversial debates about the optimal responses to mitigate and resolve the current crisis and to prevent future crises. In this context, since his time at the IMF, Professor Rogoff has featured prominently in global policy debates, producing analyses and making recommendations on how to contain the current crisis and restore overall macroeconomic stability in the euro area. On that very subject, as we all know, conditions in financial markets have taken a turn for the worse since the second half of July and early August.
First, it decided to continue to support ample liquidity conditions by conducting its refinancing operations as fixed-rate tender procedures with full allotment, at least until mid-January 2012. Let me point out that the outstanding Eurosystem credit in our refinancing operations currently amounts to about € billion and has come down since last year. The total value of marketable securities already presented and approved for Eurosystem credit operations amounts to € trillion and our counterparties have at their disposal almost € trillion out of the overall total of  2  BIS central bankers’ speeches  existing eligible securities of about € trillion. Therefore, this confirms that there is no liquidity or collateral shortage for the euro area banking system. Second, the ECB resumed its government bond market interventions under its Securities Markets Programme (SMP) in August. Via these interventions, the ECB Governing Council aims to help restore a more appropriate transmission of its monetary policy stance in an environment in which key market segments, such as those for government paper, are dysfunctional. The interventions do not influence our monetary policy stance. In order to sterilise the impact of these interventions on the liquidity conditions in the banking system, we re-absorb the liquidity injected. Let me underline that the secondary market purchases are not, and cannot be used to circumvent the principle of budgetary discipline as a pillar of Economic and Monetary Union.