darryl chan : europe, asia and the changing global economy welcoming remarks by mr darryl chan, deputy chief executive of the hong kong monetary authority, at the joint conference of the hong kong institute for monetary and financial research ( hkimr ), the european central bank ( ecb ) and the bank of finland institute for emerging economies ( bofit ) on " europe, asia and the changing global economy ", hong kong, 20 january 2025. * * * governor rehn, dr lane, distinguished guests, ladies and gentlemen, good morning! a very warm welcome to all of you for joining today's conference. as we begin the new year, let me wish everyone a prosperous year ahead. the hong kong institute for monetary and financial research ( hkimr ) is deeply honoured to host this conference in collaboration with the european central bank ( ecb ) and the bank of finland institute for emerging economies ( bofit ). the title of today's conference, " europe, asia and the changing global economy ", has been aptly chosen. barring any surprise, this year will be marked by major changes – changes that echo political and economic events taking place in different parts of the world. indeed, the world economy is at a critical juncture. we are facing increasingly challenging near - term macroeconomic environment, heightened geopolitical tensions and geoeconomic fragmentation, rising trade disruptions and protectionism. across both advanced and emerging economies, public debts as a share of economic output have surged steadily for years, further constraining the fiscal policy headroom going forward. meanwhile, medium - term growth rates are expected to decline on the back of lacklustre productivity growth and ageing populations. against this complex backdrop, policymakers need to look to structural reforms as the most effective way to stabilise debt dynamics and boost domestic productivity and longer - term growth. one notable example is the european commission's " draghi report ", which highlights the main elements necessary to enhance europe's competitiveness. many policymakers in asia share a similar sense of urgency to boost or reinvigorate economic growth. if history is any guide, a key lesson from the asian financial crisis before the turn of the century is the need to address structural weaknesses through broad - based reforms and greater regional cooperation to enhance financial resilience. history has also consistently demonstrated that an open and rules - based multilateral trading system generates value for the global community. in our view, it is crucial

’ t know how anyone could want our current budgetary situation to be any worse! do we really want to be responsible for burdening our children and grandchildren with our debts? i believe that, in the face of the worst crisis since the second world war, central banks, and the ecb in particular, have acted quickly, clearly and boldly. governments in europe and throughout the world have taken the necessary decisions in real time. in my opinion, they have done their job well. weighing down their budgets even further would not have been at all sensible. le point : you are, conversely, also being criticised for having provided liquidity support to the banks. and for having prompted the creation of speculative bubbles... jean - claude trichet : that is not the case. we have adopted a host of bold – or “ nonstandard ” – measures since the summer of 2007 in order to provide european banks with the necessary liquidity. this was essential in order to allow banks to continue financing the real economy in spite of the crisis. that said, the markets are now slowly recovering, and, as they gradually return to normal, we are progressively unwinding the exceptional measures that were introduced in order to refinance the banks. le point : given their sheer size, would the return of inflation be the only way for governments to eliminate their debts? jean - claude trichet : throughout this crisis, since the summer of 2007, the european central bank and all the central banks of the euro area, the banque de france among them, have always acted with a view to restoring confidence. do you really believe that by suggesting we give inflation a looser rein we would have restored that confidence? households ’ confidence? firms ’ and investors ’ confidence? if i were to say to you today – obviously an absurd hypothesis – that i ’ m not against a rate of inflation of around 4 %, you would see, in real time, every single market participant drastically raising market interest rates to price in future inflation. what ’ s more, a sizeable risk premium to cover possible further changes would be added. households would lose confidence. financing would be much costlier for firms. and governments would see the cost of servicing their debt soar. inflation – which, incidentally, our fellow citizens have said a firm “ no ” to – is most definitely not the solution! le point : since the onset of the crisis, politicians have been saying they will carry out a thorough review of