jose manuel gonzalez - paramo : central banks and the financial turmoil speech by mr jose manuel gonzalez - paramo, member of the executive board of the european central bank, at the eleventh annual international banking conference “ credit market turmoil in 2007 - 08 : implications for public policy ”, federal reserve bank of chicago, chicago, 25 september 2008. * 1. * * introduction 1 ladies and gentlemen, it is a great pleasure to be here in chicago on the occasion of the federal reserve bank of chicago ’ s eleventh annual international banking conference. since its inception, this conference series has aimed to gather prominent academics, policy - makers and market participants to discuss issues of major importance for our banking industries, financial systems and economies at large, such as asset price bubbles, systemic financial instability, cross - border banking, or financial globalisation. over time, a permanent concern of the organisers has been to focus on the implications for monetary and regulatory policies and, more generally, for public policies of such phenomena. it is fair to say that a great deal of knowledge has accumulated over time thanks to this series of conferences. it is also reasonable to reckon that the foundations of this body of knowledge have been put to the test by the financial market turmoil over the past year. when the tenth annual international banking conference took place in september of last year, the market turmoil had already broken out and central banks were already engaged in interventions aiming to minimise the disruptions to money markets and to preserve the implementation of their desired monetary policy stance. while market data on future interest rates suggested that we were in for a rather protracted period of tensions in money and credit markets, it was not obvious at the time that the financial turmoil would turn out to be one of the most challenging events of the last century for our financial systems. indeed, the international financial landscape looks today very different compared to one year ago and almost every day new events contribute to re - shape it further. in particular, over the past two weeks adverse events occurred almost on a daily basis and led to increased uncertainty and significant financial market volatility. a large bank failed, while several financial institutions had to be partly or entirely taken over by others. in response to the renewed tensions, public authorities announced a number of measures and initiatives to address problems at both stressed markets and troubled individual institutions. in particular, central banks stepped up their efforts to inject liquidity in global money markets in order to guarantee their smooth functioning. as i mentioned earlier, one of the

go a long way, not only in bolstering the trend of long - run growth but also in reducing the fluctuations around that trend. 7 such reforms are the means of addressing the ongoing adjustment difficulties faced by the economy and of preventing secular stagnation – which is not inevitable. however, such reforms are outside of the scope of monetary policy and fall under the remit of other national and european policymakers. as the benefits of structural reforms can take time to materialise, they must be implemented without undue delay and are needed in order to reap the full benefits from our monetary policy measures. the highly accommodative stance of monetary policy creates ideal conditions for the implementation of structural policies, as it can help to cushion the potential short - term adjustment costs of such policies by supporting current demand conditions. to conclude, the euro area economic recovery remains resilient despite the continued headwinds stemming from global economic and political uncertainties. nevertheless, in order to transform the cyclical recovery into a structural one, and thereby ensure resilience of growth in the long - run, other policymakers must play their part. the support to demand from monetary policy must be complemented with supply policies that bolster the potential growth, productivity and flexibility of the euro area economy. 1 i would like to thank danielle kedan for her contributions to this speech. 2 ecb bank lending survey, october 2016. 3 ecb survey on the access to finance of enterprises in the euro area, october 2015 to march 2016. 4 see ecb, “ small and medium - sized enterprises in the euro area : economic importance and financing conditions ”, box 6, ecb monthly bulletin, july 2013. 5 european commission, european economic forecast, autumn 2016. 6 for further discussion, see praet, p., “ lifting potential growth in the euro area ”, speech at the welt - wahrungskonferenz, 23 april 2015. 7 for further details, see praet, p. “ structural reforms and long - run growth in the euro area ”, intervention on panel at 43rd economics conference of oesterreichische nationalbank, 15 june 2015. 3 / 3 bis central bankers'speeches