jean - claude trichet : what lessons can be learned from the economic and financial crisis? speech by mr jean - claude trichet, president of the european central bank, at the “ 5e rencontres de l ’ entreprise europeenne ”, organised by la tribune, roland berger and hec, paris, 17 march 2009. * * * monsieur le president, mesdames et messieurs, the “ rencontres de l ’ entreprise europeenne ” were established – if i may interpret your mission – as a tribute to entrepreneurship, the engine of growth in europe and, more broadly, in the global economy. looking around this room, i see myself surrounded by many entrepreneurial people who create the conditions for sustainable growth, who invest in both physical capital and human capital, and who are patient enough to wait for deferred payoffs. as a central banker, i very much appreciate the medium - term orientation of business. the current crisis has exposed a different and less far - sighted kind of investment attitude. i want to draw some parallels, and make some distinctions, between the two forms of economic activity and the lessons to be learned from them. tonight, i would like to examine the roots of the current crisis and the policy responses, which are taken to address it and to inspire a new sense of direction. i will also explain what i see as the main factors that can provide the basis for a resurgence of growth in the not so distant future. a future that will see companies and their employees in the real economy return to the forefront of economic activity. throughout, i will take inspiration from the words of jean monnet : “ to abandon a project because it meets too many obstacles is often a grave mistake : the obstacles themselves provide the friction to make movement possible. ” ( jean monnet, memoires, 1976 ). financial excesses in the last ten years, we saw a dramatic shift in influence away from entrepreneurship in the real economy to speculation and gambling in the financial sector. the assumption and the hedging of genuine economic risk gradually ceased to be the main concern of international finance. this is the risk that companies face when introducing innovative new products and new processes. over time, the creation and assumption of financial risk became the core activity of the financial industry. this is the risk inherent in arbitrage and deliberate exposure to asset price changes. at some point, the financial system seemed to be no longer there primarily to hedge existing

. but in europe, the crisis is viewed differently. the problems we face today are the result of a flawed implementation of a fundamentally good idea. the bumpy ride of economic and monetary union is largely the fault of the driver, not the vehicle. he has to learn from his mistakes and get some more practice – then he ’ ll be a better driver. as for the vehicle, it needs better brakes, for even the best of drivers can occasionally make mistakes. thank you for your attention. bis central bankers ’ speeches chart 1 real gdp per capita growth between 1997 – 2007 note : growth rate shown in the chart is the percentage increase between 1997 and 2007. sources : eurostat and haver analytics. chart 2 real gdp developments since 1996 note : quarterly ; 2000q1 = 100. source : haver analytics and eurostat. bis central bankers ’ speeches chart 3 ex - post real interest rates note : series calculated as ten year benchmark bonds minus annual hicp inflation. annual averages. source : ecb staff calculations. chart 4 break - even inflation rates note : last observation refers to 14 february 2011. daily. source : ecb staff calculations. bis central bankers ’ speeches chart 5 mfi loans mfi loans to households – mfi loans to non - financial corporations note : last observation refers to 2010q4. quarterly ; year - on - year % change ; not adjusted for securitisation. source : european central bank. chart 6 real residential property prices in selected euro area countries note : quarterly ; 1998q1 = 100. source : hiebert and vansteenkiste ( 2010 ). bis central bankers ’ speeches chart 7 growth in real housing construction works between 2000 – 2007 note : growth rate shown in the chart is the percentage increase between 2000 and 2007. sources : haver analytics and eurostat. chart 8 current account balances in selected euro area countries note : 2009 ; % of gdp. source : haver analytics. bis central bankers ’ speeches chart 9 general government budget balance in selected years note : % of gdp. sources : haver analytics ; european commission. chart 10 consequences of the global financial crisis household credit growth ( annual % ) – general government budget balance ( % of gdp ) source : haver analytics, european central bank and eurostat. bis central bankers ’ speeches chart 11 credit growth to the private sector note : annual averages of monthly growth rates. sources : haver analytics and imf. chart 12 embig spreads in the run