luis m linde : united kingdom and spain – assessing current issues intervention by mr luis m linde, governor of the bank of spain, at the dinner opening the 25th tertulias hispano - britanicas, madrid, 26 october 2012. * * * almost a quarter of a century back, following the visit by her majesty queen elizabeth ii to madrid in 1988, a group of spanish and british diplomats, politicians, academics and civil servants had an excellent idea. they took advantage of the gibraltar dispute not to further cool relations between spain and the united kingdom, or to squabble some more, but rather to seek to be closer friends and try and understand one another better. today marks the 25th edition of the tertulias. let me welcome all those taking part, firstly and especially our british friends, who honour us with their presence. a few days ago, perusing james boswell ’ s legendary book on the life of samuel johnson, one of european culture ’ s literary giants, i came across several paragraphs in which boswell relates dr johnson ’ s interest in spain. he was convinced that spain was a greatly unknown country in england and in europe, and he suspected it could teach much to those taking the trouble to travel there. samuel johnson made this statement around the mid - 1760s. today, spain is no doubt much better known in the united kingdom than in johnson ’ s time, as it is also the case for the united kingdom being better known in spain. but everything is relative and i believe it ’ s not difficult to spot black holes, mistaken notions and errors of understanding on both sides. while these tertulias are usually an opportunity to overcome some of these problems, they most importantly allow us to understand our respective stances on current, important or pressing issues. and we also enjoy ourselves. because, unlike other meetings, the tertulias are, from my experience, a rather entertaining event. i still have fond memories of the meetings i attended and the discussions we had in the now distant 1990s in santiago de compostela, in seville, in santander and also in oxford and in edinburgh. the tertulias were instituted at what was a key time in recent european history : the disappearance of the berlin wall, german reunification, the collapse of the soviet union and the start of the european monetary union project. next came the great economic expansion at the onset of the 21st century, the international financial crisis and the serious economic

5 march 2018 the new challenges facing central banks colegio de ingenieros de caminos luis m. linde governor let me begin by thanking the school of civil engineering for inviting me to inaugurate this cycle of meetings with regulatory agencies. many thanks to the president of the school, its management board and all of you for being here today. the international financial crisis that began in 2007 has given rise to various changes and to the emergence of new challenges. central banks are, today, in a rather different and novel situation compared with where we were before the crisis some 10 years back, and we are affected by a debate about our functions in the economy and the thrust of our policies. in the past decade central banks have increased monetary stimuli manifold and there have been deep - seated changes in the monetary and regulatory policy objectives and instruments implemented. we are now emerging from the crisis and this is raising even more the profile of the debate on the role central banks should play and whether the policies pursued in recent years should be maintained, or progressively abandoned, and at what speed and to what extent either alternative should be taken. the challenges facing central banks can be grouped in three areas : first, what is being labelled as the “ new normal ” in the macroeconomy and its implications for monetary policy ; second, the challenge for financial regulation policies ; and third, the new challenges posed by financial innovation and the new technologies. the impact of the crisis on monetary policy but before addressing these challenges, i think it might be useful to take a short step back to remember where we have come from. we can only understand today ’ s challenges if we bear in mind the changes, often far - reaching, that have come about in central banks in response to the crisis. the global financial crisis came about following a build - up of bubbles in the advanced economies, mainly in the financial and real estate sectors, a process to which easy financing conditions proved conducive in a setting in which risks were not appropriately priced. in any event, what was surprising was the intensity and global nature of the crisis that broke in 2008. given highly integrated financial markets and complex interconnections, instability spread rapidly, leading to the most serious financial crisis since the second world war. in the european union the crisis was, moreover, exacerbated by a double - dip recession, which has prolonged the recovery period and has also revealed the weakness of the euro area ’ s institutional framework. the crisis also left