a challenge not only to emerging economies but also to the more developed financial systems and economies. lessons from the financial crisis while there are benefits to be gained from the internationalization of financial systems, the risks to financial stability have also increased immensely. the risks generally emanate from the greater prospects for contagion following the greater degree of interdependence. these risks would be even more pronounced in emerging economies in which financial systems have yet to become more developed and matured. to be better positioned to reap the benefits from internationalization of financial systems in emerging economies, the crisis provides us with several lessons. firstly, is to recognize that the different parts of the domestic financial system is highly interconnected. this also includes those parts that may not be under the regulatory capture. financial stress in a specific segment may no longer be confined to that segment but may rapidly be transmitted to the rest of the financial system. thus, a piecemeal policy response would not be sufficient. it would require a comprehensive response to ensure that such stressed conditions does not evolve into a major financial crisis. secondly, the build - up of risks to financial stability need to be identified early. pre - emptive action would reduce the cost of the crisis on the financial system and the economy. third, the regulatory authorities need to be accorded the necessary powers to manage the risks to financial stability. fourth, the optimal policy mix may not only include policy actions to address immediate term issues but would also need to simultaneously address the underlying structural problems. fifth, is to give recognition to the importance of enabling conditions that will render the implemented policies to yield the desired outcomes. finally, to facilitate effective policy decision making there needs to be a platform and governance process for policy coordination across agencies within an economy and for this to be extended for regional and international collective action. following the recent global financial crisis, the policy response at the national level has been extensive and on an unprecedented scale. while there has been wide ranging financial reforms at the international level to strengthen the resilience of the financial sector, the cross bis central bankers ’ speeches border dimension of policy - making has not been as extensive. this is despite the swift spread of financial and economic shocks throughout the global economy and international financial system following the eruption of the financial crisis in 2008. despite these increased challenges, the institutional arrangements for policy cooperation and coordination have yet to reach the levels that are commensurate with the degree of global economic and financial integration. while the individual efforts

the eu and the ecb into scapegoats. this is not fair. the european construction has helped us to create a level of prosperity, which has played an important role in reuniting europe. our values are clear. we trust in democracy in freedom, in human rights. we trust in the fact that market economies are the best way to produce goods, services and prosperity. and our future will depend on the people of europe. it is the free will of our democracies which will shape europe in the long run. and at the ecb we are very proud to be already an executive institution ; we are the “ avant - garde ” of europe. die zeit : do you understand the french desire for a stronger role of national concerns in europe? trichet : i am not speaking of any particular nation. all european nations are members of the european team. and the success of europe is the success of the team. die zeit : perhaps the president of the ecb has to play a more political role in the next years than you want to... trichet : communication with the large public opinion, with all our fellow citizens is certainly one of the most important issues for all who care about the unity of europe. die zeit : chancellor angela merkel wants european rules to protect europe from sovereign wealth funds. do we need protection? trichet : these funds, like all new phenomenons, have to be studied and carefully observed. on the other hand the principle of free circulation of capital at the level of the global economy has been beneficial for all economies concerned. die zeit : the euro is at an all time high vis - a - vis the dollar and the yen. is the strategy of benign neglect the right one in times asia is holding down its currencies? trichet : on asian emerging economies ’ currencies we have a very clear message which the central banks of the g7 together with the executive branches have confirmed this spring. we all say the asian emerging economies as well as the global economy would be better off if these currencies would be more flexible. die zeit : markets are worried about the crisis of the sub - prime credit market in america. are you worried as well? trichet : in a number of segments in the global finance system we have observed in the past a certain under - appreciation of risks. that was visible in the low level of volatility, the low level of spreads, the low level