jean - claude trichet : global governance today keynote address by mr jean - claude trichet, president of the european central bank, at the council on foreign relations, new york, 26 april 2010. * * * ladies and gentlemen, it is a real pleasure to be back here at the council on foreign relations. you will all be familiar with the well - worn french expression “ plus ca change, plus c ’ est la meme chose ” – and its new york equivalent “ same old, same old ” – to imply a world - weary feeling that despite the appearance of change, things remain the same. well, since my last visit three years ago, i think we will all agree that there have been the most dramatic changes in the world economy. and these are changes that suggest that things will not and should not remain the same. back in april 2007, i noted that the ever - closer integration of national economies and the rise in capital mobility had made the international system more vulnerable to changes in investor sentiment. i added that it was vital to strengthen the ability of the global economic system to absorb shocks to preserve global financial stability. but few then could have imagined the magnitude of what eventually came to pass, starting with the subprime crisis in the summer of 2007, turning into a full - blown global financial crisis in the autumn of the following year with the collapse of lehman brothers, and culminating in a devastating impact on trade, production and jobs. these are not entirely new phenomena – but we have to go a long way back in the history books for a suitable comparison. according to economic historians barry eichengreen and kevin o ’ rourke, the initial decline in global production between mid - 2008 and mid - 2009 was broadly comparable with that at the beginning of the great depression. the corresponding correction in global equity prices and the fall in global trade volumes were even larger. the good news is that the global economy has now turned the corner, largely thanks to the unprecedented support measures taken by both central banks and governments, which have helped to restore confidence. yet the recovery remains somewhat fragile and not yet sufficiently supported by private demand ; therefore, it is not the time for complacency. i should add that the recovery should be measured in much broader terms than focusing on a resumption of gdp growth. a full recovery also implies a return to sustainable fiscal positions. it means a full restoration of trust in some of our financial institutions. and it requires a healing of the scars that the

it could do so based on a high degree of analytical depth and information sharing at a global level that the central banks ’ global cooperation has been able to develop over time. these analytical contributions assisted in driving the strong and coordinated policy response when the crisis erupted. we have now scaled back our cross - border operations as markets have recovered, but the spirit of cooperation and the readiness to work together is stronger than ever. regulatory arbitrage but as much as some aspects of global governance appear to have passed the severe test of the global crisis, we should remember the significant shortcomings that may have contributed to creating the conditions for the crisis to happen in the first place. one is the lack of coordination in financial regulation that was pervasive before the crisis and which encouraged financial institutions to engage in a large degree of regulatory arbitrage. this was the unavoidable result of the fact that while financial players were becoming increasingly global, and despite the remarkable efforts of the basel committee in respect of the banking sector, financial regulation remained largely national, with only relatively weak coordination at the international level. the dramatic under - supply of the global public good of international financial stability is an area where reform is essential. global imbalances another shortcoming that needs to be addressed for the future was the insufficient orientation of macroeconomic policies towards medium - term stability and sustainability. this led to the build - up of unsustainable external imbalances between deficit and surplus economies prior to the crisis. although warnings had been voiced, including by the imf, about the risks of a disorderly adjustment, there was no effective mechanism to influence macroeconomic and structural policies in key countries where those policies appeared unsustainable from the standpoint of global economic and financial stability. this must change – and it requires both the work of international institutions and the cooperation of national authorities. 3. the evolution of global governance let me turn to the question of how global governance is evolving after the crisis. the scope of international cooperation has been significantly broadened. after an initially hesitant response, governments implemented broadly coordinated policies, both within the eu as well as at the global level under the aegis of the g20. and central banks were able to take quick, decisive and coordinated action at short notice. but the crisis also showed that gaps in the system of global governance – in terms of both efficiency and legitimacy – have to be filled. this can be done – indeed, it is being done – by strengthening the mandate of