jean - claude trichet : the european economy - current situation, prospects, challenges speech by mr jean - claude trichet, president of the european central bank, at the “ forum economique international des ameriques ” conference de montreal, montreal, 30 may 2005. * * * mr prime minister, mr mayor, mr president, ladies and gentlemen, it is with great pleasure that i have come to attend the debate and discussion at the international economic forum of the americas / montreal conference, and more especially to address you today. the issue chosen for the forum this year, “ success at a time of turbulence ”, is especially relevant in a world beset by constant economic, financial and technological change. so i would like today to share the european experience with you. allow me first of all to discuss the recent development of economic activity in the euro area, the better to underscore the prospects and to describe the challenges to be faced if europe is to make its own contribution to the growth of a world undergoing in - depth transformation and thus tending to be turbulent. the economy of the euro area : a stable macroeconomic situation, but economic dynamism that requires further stimulation since its establishment over six years ago, economic and monetary union has helped to provide a stable macroeconomic environment. over the past few years, the annual inflation rate in the euro area has remained slightly higher than our own definition of price stability, that is a rise in prices of less than 2 % and close to 2 %. yet this situation is more a reflection of temporary shocks linked in particular to the trend in the price of crude oil, than to any underlying inflationary trend, which remains generally moderate today. inflation expectations have remained anchored at under 2 %, in line with our definition of price stability. the fact that the run of oil price hikes has not jeopardised the stability of inflation expectations is no mere coincidence. it is a mark of success, showing the high credibility level of the young european central bank, which has proven capable of convincingly providing businessmen in an economic area with a population of some 306 million, with a stable anchorage point for their price expectations. thus, as long as inflation and inflation expectations remain solidly anchored to levels compatible with price stability, monetary policy will make a crucial contribution to economic growth by fostering an exceptionally low interest level on the short, medium and long - term markets, and by creating an economic environment that entails minimal distortion and that helps businessmen to

economies have moved to flexible exchange rate regimes, and have also adopted inflation targets. in several cases, canada has played an important role in that process. because of our long experience with flexible exchange rates and our strong reputation in inflation - targeting, several emerging - market central banks have asked for the bank of canada's assistance in developing and operating frameworks based on inflation targets. a robust financial infrastructure another important lesson drawn from recent crises is the need for a strong financial infrastructure. weak banking systems were at the heart of nearly every one of the recent financial crises. to perform well their important role of intermediating between lenders and borrowers, banks and other financial institutions need to work within a strong framework — a framework distinguished by clear accounting and disclosure standards, appropriate regulatory and supervisory practices, and well - defined bankruptcy rules. in many cases, these institutional arrangements were found wanting. the international community has done a lot to contribute to the strengthening of financial systems in emerging - market economies and to improve risk management in major industrial countries. international groups, such as the bank for international settlements ( bis ), the international monetary fund ( imf ), the group of twenty ( g - 20 ), and the financial stability forum ( fsf ), have worked hard to establish globally accepted guideposts — codes and standards — for the sound operation of financial institutions and systems. but guideposts are not much use if they are not followed. so it was also essential to develop the means for assessing adherence to key standards and for public disclosure of important economic and financial information. if there is a lasting lesson in recent history, it is that we need greater transparency. better and more timely data should lead to more informed judgments about how risky certain investments are. and this should help avoid the crises that can be set off by the sudden revelation of problems. as i said earlier, the bank of canada and the government of canada have fully participated in, and contributed to, many of these initiatives. i would highlight, in particular, our involvement with the fsf and with the g - 20, until recently chaired by finance minister paul martin. the office of the superintendent of financial institutions and provincial securities commissions have also been working with the fsf and with the bis to identify system - wide weaknesses and to develop worldwide financial standards and codes. the bank of canada, together with the bank of england, has also been promoting the idea of clear, upfront limits on official lending ( that is, lending from international financial