Jean Claude Trichet: Hearing at the Economic and Monetary Affairs Committee of the European Parliament Introductory speech by Mr Jean Claude Trichet, President of the European Central Bank, at a hearing before the Economic and Monetary Affairs Committee of the European Parliament, Brussels, 7 December 2009. *  *  *  Dear Madam Chair, Dear Members of the Committee on Economic and Monetary Affairs, This is our first meeting since the entry into force of the Lisbon Treaty. The new Treaty is a reason to celebrate: in Europe generally, here at the European Parliament, but also at the ECB. It will make the Union stronger, more effective and more efficient. The powers and responsibilities of the European Parliament increase. The ECB formally becomes an institution of the European Union, and all its essential features, above all its independence, are confirmed. Dans le cadre du nouveau traité, nous nous réjouissons de notre collaboration à venir avec le Parlement. La qualité de cette coopération a été exemplaire à mes yeux au cours de ces dernières années. Unsere heutige Anhörung ist drei wichtigen Themen gewidmet: erstens, unserer Einschätzung der aktuellen wirtschaftlichen Lage; zweitens, unserer Exit-Strategie zum Auslaufen der außergewöhnlichen geldpolitischen Maßnahmen, die wir in dem Höhepunkt der Krise eingeführt hatten; und drittens, dem Thema der systemischen Risiken im Finanzsystem. 1. Economic and monetary developments  The economic situation and outlook have continued to improve since my previous hearing before this Committee ten weeks ago. The euro area economy shows increasing signs of recovery.

The global economy is expected to remain weak following the synchronized recession in the advanced economies. While there is significant uncertainty on the prospects for recovery, the stimulus measures being implemented across the globe and the measures to address the financial crisis in the advanced economies are expected to contribute to improving conditions in the second half of this year. However, should there be further delays in addressing the impairment of the financial systems in the crisis affected countries, this would be a risk to the economic recovery process. This would in turn continue to have significant spillover effects on the rest of the world. Whilst Malaysia has successfully maintained the stability of its financial system during this period of uncertainty, the economy is not insulated from these global developments. Despite the high degree of openness of our economy, Malaysian businesses are however, less leveraged with significantly less foreign financial exposures and therefore better able to cope with the effects of the global economic downturn. During this recent decade, Malaysia has aggressively implemented measures to promote domestic demand as a driver for growth and thus achieve a more balanced growth. While the export sector is still important, the significance of domestic demand has gradually increased. In this current environment, the Malaysian Government has implemented a significant fiscal stimulus to sustain domestic demand. Following the reduction in interest rates, retail borrowing costs have declined to new historical lows.