• Dollar funding market improved post LTRO, still not back to pre-crisis levels
• LTRO operations, particularly first one, were used to stabilise banking sector
• The normalisation of market situation in euro zone has improved since February, but remains reversible
• Spanish government is taking reform steps, no reason why the market situation should not normalise there too
• Rise in ECB balance sheet isn’t atypical
• ECB decided on LTRO because of deflation risk
• LTRO inflation risk is in no way immediate
• Aggregate demand is not creating inflationary pressure
• Inflation risks could materialize as growth accelerates
• 800 bln euros of excess liquidity in euro system, which will persist throughout 2012
• ECB has instruments to absorb liquidity when necessary
• Banks must use favourable situation to boost capital
• Euro zone states should reform to support growth