supported by the imf, and it has also been supported by the ecb within our own mandate, in numbers, in size … in this period you were in paris. do you have any observations as someone working in the french system about what was going on in ireland at this time? it ’ s clear that the irish government – in the weeks after lehman brothers failed – guaranteed the liabilities or the entire irish banking system. what i can say is that there was a certainly a lot of proximity between the views of the french government and the views of the ecb at that time, on several accounts. first, that the decision, that the blanket guarantee on deposits was not the right decision to take. this was also the ecb ’ s view because it created issues elsewhere in the euro zone. and second, that there was high financial stability risk, that there were contagion risks which justified a very careful look at these burden - sharing issues, so i think that the view was not different in paris. and certainly that ireland had to be supported, which the french government did also by supporting the programme and by being instrumental in the creation of the efsf... what would have been the preferable route for the irish government to take at that time? it ’ s so difficult to take these kinds of decisions. i certainly would not claim to pass a moral judgement here. you have to take decisions based on the information you have. there were many negative consequences, and i take it that these consequences were not foreseen when the decision was taken... that remains the view? from a european perspective, many of the interactions and cross border consequences and effects were not properly understood initially and that ’ s one reason why, in a sense, the euro zone authorities collectively let the crisis develop and deepen. these kinds of interactions and spillovers were only gradually understood. it was only late down the road for instance that the esm was created, finally, with adequate size. so it has taken quite some time for europe to understand what was going on and that this was a regional crisis. it was not only a set of local issues, but one with the potential to disrupt the system as a whole. that ’ s a collective responsibility, not only an irish one. on deflation / greece …... the starting point is not deflation, but inflation being low, far away from our definition of price stability which is below but close to 2 % in

important currency, the euro, has appeared on the stage. this has had important consequences, but has not meant a shift to a genuine duopoly in the supply of international currencies. while the euro has become a credible alternative to the dollar, this has had little impact on the dollar ’ s centrality in the ims. in particular, the exorbitant privilege remains largely the dollar ’ s attribute. to be sure, it is undeniable that the very low yield spreads associated, until approximately 2008, with the debt of certain european countries were mainly a by - product of the “ privilege ” of being part of the euro area. and it is also true that this was one of the factors that contributed to underestimating the crucial importance of fiscal discipline and competitiveness in the monetary union. but it is equally accurate that the idiosyncratic negative shocks stemming from such euro area countries in the past two years have led to a major re - pricing of their sovereign risk. this is opposite of what has happened on the occasion of similar negative shocks originating from the united states. the current stability of the exchange rate of the euro is more attributable to the overall good fundamentals of the whole euro area than to any exorbitant privilege. but the third and most significant change, from a triffin perspective, is the following : there is no longer a fundamental global liquidity3 shortage that is intrinsic to the very functioning of borio and zhu ( 2008 ) insightfully define liquidity is “ the ease with which perceptions of value can be turned into purchasing power ”. bis central bankers ’ speeches the system. the accumulation of global external imbalances in today ’ s world should not be seen as a necessary precondition for the provision of global liquidity and the expansion of world trade. let me explain. today, the united states and the euro area are not obliged to run rising current account deficits to meet the demand for dollars or euros. 4 this is for two main, interlinked reasons. first, well - functioning, more liquid and deeply integrated global financial markets enable reserve - issuing countries to provide the rest of the world with safe and liquid financial liabilities while investing a corresponding amount in a wide range of financial assets abroad. the euro has indeed become an important international currency since its inception and the euro area has been running a balanced current account. in a world where there is no longer a one - to - one link between current