jean - claude trichet : the euro @ 10 – achievements and responsibilities remarks by mr jean - claude trichet, president of the european central bank, at the ceremony of the european parliament to mark the 10th anniversary of the euro, strasbourg, 13 january 2009. * * * mr president, honourable members of the european parliament, it is an immense honour and a great pleasure for me to take part in this celebration of one of europe ’ s most momentous achievements, the euro. one of europe ’ s founding fathers – jean monnet – once said : “ when an idea meets the needs of the time, it ceases to belong to its creators and becomes more powerful than those responsible for it ”. and he added : “ there is no such thing as premature ideas, there are only ripe times that one should wait for ”. for decades, the single european currency was merely an idea shared by a few people. many others said that it could not be done, or that it was bound to fail. today, the single currency is a reality for 329 million citizens. the creation of the euro will one day be seen as a decisive step on the long path towards an “ ever closer union ” among the people of europe. since the introduction of the euro, fellow europeans have enjoyed a level of price stability which previously had been achieved in only a few of the euro area countries. this price stability is a direct benefit to all citizens. it protects incomes and savings, and it helps to bring down borrowing costs, thus promoting investment, job creation and prosperity over the medium and long term. the single currency has been a factor of dynamism for the european economy. it has enhanced price transparency, increased trade, and promoted economic and financial integration within the euro area and with the rest of the world. in recent months we have seen another benefit of the euro : the financial crisis is demonstrating that in turbulent financial waters it is better to be on a large, solid and steady ship rather than on a small vessel. would europe have been able to act as swiftly, decisively and coherently if we did not have the single currency uniting us? would we have been able to protect many separate national currencies from the fallout of the financial crisis? i believe that we can be proud of the reaction of european authorities, parliaments, governments and central banks. together we have shown that europe is capable of taking decisions, even in the most difficult circumstances. we owe the historic success of the euro to

sensitive capital requirements if risks cannot be measured and modelled. basel iii therefore aligns the degree of risk sensitivity with the extent to which it is possible to measure and model risks. second, there are some more conservative haircuts on collateral and some input floors. these input floors lie beneath the parameters for “ probability of default ” and “ loss given default ”. and there will be floors beneath the “ exposure at default ” calculation as well. these floors work bottom - up ; they will keep banks from feeding their internal models with excessively low inputs. this serves as a safeguard as it prevents capital requirements from being set too low. and, yes, these input floors make the rules a bit less risk - sensitive. but we need to look at this in absolute terms – for residential mortgages, the input floor increases from three basis points to five basis points. five basis points correspond to a once - in - 2, 000 years default rate! is such a floor really too conservative? at global level, the bottom - up reforms see small increases in capital for exposures to other banks, large corporates and equity investments. this is somewhat offset 1 / 3 bis central bankers'speeches by a reduction in risk weights for loans to small and medium - sized enterprises. third, there is the hotly debated output floor. it ensures that risk - weighted assets calculated with internal models do not fall too far below those calculated with standardised approaches. “ too far below ” means they must reach at least 72. 5 %. does that kill risk sensitivity? no, it does not. obviously, there is still room for banks to apply individual risk weights and to benefit from lower capital requirements for classic, low - risk banking business. and more than that : the effective floor might even be lower than 72. 5 %. this is due to the fact that many banks apply the standardised approaches to at least some exposures. this implies that, depending on the share of assets still under the standardised approach, the effective floor for them could be lower than 72. 5 %. at the same time, basel iii makes the standardised approaches themselves more risk - sensitive. let me give you just one example : residential mortgages. under basel ii, the standardised approach assigned the same risk weight to almost all such mortgages. but in basel iii, the risk weights of residential mortgages depend on the loan - to - value ratios. the output floor is thus set in relation to a benchmark,