Well, let me say two things. First, embedded in our projection is that we do expect a recession in Europe. We have highlighted that. The issues—both the scale of the fiscal adjustments that many countries are having to make in Europe and a process of de-leveraging of the banking system that is picking up in that economy—in our view, are going to lead to a brief recession in Europe. That's the first thing.
Second, our expectation for the measures that are being taken by European authorities is that they will contain the crisis, but that's different from resolving the issue. Resolving the issue is going to take years, and there may need to be additional steps even in the near term in order to ensure containment. But containment gets to the issue, in terms of the effect on Canada. Our trading relationship, our direct link with Europe, is relatively modest and so the principal channels to the Canadian economy are two.
First are financial conditions as a whole. Now, again, our banking system does not have a lot of exposure to the European financial system as a whole, so when we talk about financial contagion, we're talking about a generalized reduction in the price of risky assets, such as we're seeing today in financial markets, which of course tightens overall financial conditions, makes it more expensive for Canadian businesses and households.
Then second are confidence impacts, because of the knock-on effect of what's happening in Europe on other economies and through to Canadian business and Canadian households. That's why one of our upside risks is actually that there be more decisive policy actions taken in advanced economies. We think it's fair to say that the overall level of confidence in the ability and willingness of policy-makers in the major economies to take the necessary steps in a timely manner to right their economies and help the global economies has been somewhat diminished by events over the course of the last year.