Thank you for that.
On the first question with respect to Europe, what we have said, and it's still relevant, is that we expect the measures to contain the situation, but there are clear downside risks to that assumption. When we first said that we didn't have the actual plan, but we expected to have something similar to what was announced. But we need the details and then, obviously, we need implementation. There are always risks around both those aspects.
I'll be slightly more specific. With respect, for example, to the recapitalization of the European banking system, where the objective is to raise the capital ratio of that banking system, we would advocate that a component of that be met through new capital, so that it is not all met through a reduction in assets. I say that because it's a reduction in assets that's going to intensify the pressures on financial conditions, not only in Europe but elsewhere in the world, and it's going to displace new credit creation in Europe and elsewhere as assets are sold. If there is a better opportunity for a financial institution to buy an asset out of a European bank rather than make a new loan, that's going to have an impact, for example in the United States, if it's a U.S. dollar asset. So we would put emphasis on at least a component being met through new capital. There are ways to do that relatively efficiently, including with contingent capital that would reduce the dilution of existing shareholders, given current trading levels.
So, yes, we're monitoring this closely and we're in close discussion with our European colleagues. There will be meetings later this week, through the week and early next week, as part of the normal course, in Basel and other places, but this will clearly be one of the issues there.
As to your question about sustainable resource use, it is a very important one. I would say that from the bank's perspective, these are issues that ultimately go to the medium- and longer-term potential growth of the economy, on which we have to take a very cold-eyed, objective view and adjust our perspective of where that potential growth can go, because that is ultimately one of the key determinants of how fast we can run the economy without generating inflationary pressures.
We have reduced our outlook for potential growth in the last couple of years. We have re-confirmed it in this projection. These issues will have an effect. It was referenced earlier. Both in Fort McMurray and Saskatchewan, you see some of the pressures that do come on when paces of development becomes too large.There are broader issues around this, though, which have to do with national balance sheets, and other issues that we don't have time to get into.