speech to the consultative assembly of the council of europe, strasbourg, 10 december 1951. standard eurobarometer no. 85. bis central bankers ’ speeches this does not apply only to europe. the data show that in the us, too, people ’ s trust has declined in almost all institutions, including the presidency, congress and the supreme court. 6 the fact that this is a worldwide phenomenon cannot however exonerate us europeans, because we are the only group of people in the world to have built a supranational polity in the certainty that it was indispensable to provide security where individual countries could not. is europe still the answer? so the question is simple, but fundamental : is working together still the best way to solve the new challenges which we face? for various reasons the answer is an unequivocal yes. if those challenges are continentwide, acting exclusively at national level is not enough. and if they are global, collaboration between the member states gives europe a strong voice. the recent climate change negotiations serve as an example. this global issue can only be addressed through internationally coordinated policies. and the critical mass of europe speaking with one voice has produced results well beyond the reach of individual countries. only the pressure exerted by european countries forming a common front was able to make the paris climate conference a success. and only the eu ’ s existence allowed that common front to be built. in a world where technology is diminishing physical barriers, europe is exerting influence in other ways too. its ability, with its market of 500 million consumers, to impose global recognition of property rights, or respect for privacy rights on the internet, is obviously stronger that any of its members could hope for alone. national sovereignty remains in many respects the fundamental element of each country ’ s government. but for challenges that transcend national borders, the only way to preserve sovereignty – that is, to make the voice of citizens heard in a global context – is for us europeans to share sovereignty within the european union, which has served as a multiplier of our national strength. and where responses can only be provided at the supranational level, we should adopt the same approach that allowed de gasperi and his contemporaries to secure legitimacy for their actions : we should focus on those actions that deliver tangible and immediately recognisable results. there are two kinds. the first kind of action is to complete those initiatives that are already under way, because stopping half -

corporate bond markets. we have thus tried to minimise this kind of side effect, and not to worsen existing shortages of certain assets. third, we must be aware that our actions might distort prices. the more bonds we buy and the longer we go on buying them, the greater the risk that prices no longer reflect market conditions. these are some of the risks we have to bear in mind. viewed from today, however, it seems that our non - standard measures did have the desired effects on financial markets and, consequently, on the real economy. but what does this mean for the future? seeing the short - term effects, some observers suggest making the balance sheet part of the new orthodoxy of monetary policy strategy – or part of the standard toolbox, as they like to say. let me say clearly that i think this should not happen. the short - term benefits should not lead us to overlook the long - term costs and the severe side effects. these costs and side effects can be quite high, and they tend to grow over time. thus, a comprehensive asset purchase programme, such as the current one, should only be used to fight a real risk of deflation. in my view, that is the only valid reason for using such tools. 3 / 9 bis central bankers'speeches for one thing, i wonder how it would affect the incentives for various stakeholders. financial market participants, firms, consumers and also governments have to varying degrees adjusted to historically low interest rates and ample liquidity. and for some of them, low interest rates have certainly made life easier. it is therefore crucial to realise that this won ’ t go on forever – the exit will come eventually – and to adjust accordingly. second, there is the issue of financial stability. when the central bank buys bonds, it might also fuel asset price bubbles, financed by cheap credit. this risk increases the longer unconventional monetary policy measures continue to be applied. and third, monetary policy can only buy time – no matter how loose or unconventional it becomes. monetary policy is not a tool meant to alter the long - term viability of economies, and it would be dangerous to believe otherwise. i will come back to this point in a few minutes. and it ’ s not just about the tools, it ’ s also about the target. a second idea that is often put forward is that we should change our objective and strive for higher inflation. 2 proponents of this idea claim that we should no longer aim for inflation rates