jean - claude trichet : strengthening the european union ’ s framework for crisis management opening statement by mr jean - claude trichet, president of the european central bank, at the european commission conference “ building a crisis management framework for the internal market ”, brussels, 19 march 2010. * * * ladies and gentlemen, i would like to thank the commission for inviting me to today ’ s conference. i trust that the discussion will help to identify avenues that will strengthen the european union ’ s framework for crisis management and resolution for the years to come. the evolving crisis reflecting on the crisis from today ’ s perspective, i would say that what is now called “ the crisis ” is a deeply evolving phenomenon. it evolved from a crisis of liquidity into a full - scale crisis of banking and finance, and then into a global financial and economic crisis. and as we are all well aware, a great deal of attention is currently focused on fiscal policy and public finances. at the same time, policy - makers around the world have so far fended off a number of threats : a global meltdown of finance, a downward spiralling of the economy and a massive increase in global levels of unemployment. fundamentally, this is a crisis of valuation. but it is also a crisis that has led us, and continues to lead us, to fundamental re - evaluation. we have had to re - evaluate our understanding of the nature of risk of major market disruptions. we have had to re - evaluate the potential responses in terms of the implementation of monetary policy and the effectiveness of fiscal policy. and as citizens and policy - makers, we have to re - evaluate our understanding of the role of finance in our economies and our societies. in particular, we must consider fundamental questions about the relative importance and limits of the pure financial “ game ” in markets, about the potential abuse of market power, and, most importantly, about the function of the financial sector in the broader economy. in my view there is a clear litmus test for this function : whether or not finance serves the real economy. financial reform therefore must ensure that finance is properly reconnected with the real economy. reform needs to go beyond the banking sector on which so much attention has been focused. we also have to look very closely at non - bank financial institutions and at the set - up and functioning of financial markets. financial markets are not always efficient. they are also not always broad, liquid and representing a fair competition of views and positions. quite

equivalent of the current defence budget. it would therefore be irresponsible to build our future on the already outdated bet of a zero or very low cost debt. a higher deficit today clearly implies less room for manoeuvre and action tomorrow in favour of ecology, health and education. the increase in the cost of debt ii. how to set a credible debt reduction strategy? 1. revised european fiscal rules this brings me to the debate that has kept you busy this afternoon : the debate on rules, in particular european rules. it has been put on hold since the start of 2020, due to the covid - 19 crisis, and now perhaps the war in ukraine. but this debate will have to be wrapped up : i neither believe in traditionalists - those in europe who simply call for a return to " business as usual " - nor in angelicists those who simply believe in the wisdom of institutional processes, or in enlightened economic debates for steering national fiscal cycles. no, experience tells us, particularly in france, that we need rules and not too much " discretion " in the sense of entirely discretionary choices. but these rules must be revised and simplified, in order to be better respected and more credible. paolo gentiloni and the european commission have the onerous task of taking page 6 of 9 forward this discussion which is a matter for political authorities, so i will just make a few remarks. it first seems reasonable to me to avoid, in this matter and at this stage, any treaty change. we could keep the 3 % deficit target, which is a useful anchor, and even the 60 % debt target. but the rule of a 1 / 20 annual linear adjustment towards the latter target has become unrealistic because it is too strict, especially for highly indebted countries. and, instead of the structural deficit which no one really understands, or even knows how to calculate accurately we could set a ceiling on the growth rate of public spending as an operational target. at constant tax rates, this amounts to much the same thing in economic terms, and was the main thrust of the reform put forward in 2019 by the european budget committee ( ebc ) chaired by niels thygesen. these rules should not simply be seen as a constraint imposed by brussels, but should be widely internalised,'taken up'in our french budgetary debate, as they are in our national interest. 2. adding a european stabilisation and investment capacity allow me to