jean - claude trichet : hearing at the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, brussels, 8 december 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis de cette quatrieme rencontre avec votre commission au cours de cette annee. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. je vous fournirai ensuite de plus amples informations sur nos operations de politique monetaire ainsi que notre dispositif de garanties. am schluss mochte ich auf das management der finanzkrise in europa eingehen und einige der reformvorschlage fur das internationale finanzsystem hervorheben, die ich fur besonders wichtig halte. danach beantworte ich wie immer gerne ihre fragen. economic and monetary developments since my previous hearing before your committee on 10 september, euro area annual inflation has continued to decline, falling to 2. 1 % in november. with lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy - relevant horizon. risks to the outlook for price stability are more balanced than in the past. unexpected further declines in commodity prices could put downward pressure on inflation, while upside risks to price stability could materialise if the fall in commodity prices were to reverse or if domestic price pressures were to turn out stronger than assumed. turning to economic developments, since september, there has been an intensification and broadening of the financial turmoil, contributing in the third quarter to a contraction of 0. 2 % in real gdp growth compared to the previous quarter. global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters. subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken. as a whole, average growth in 2009 could be between - 1 % and 0 % according to the eurosystem staff

to promote consistent implementation of borrower - based instruments across the eu, the esrb can issue recommendations that are to operate through a comply - or - explain mechanism. up until today, no such recommendation exists for the real estate market. when it comes to the implementation of borrower - based instruments in euro area / ssm countries, the ecb can play a key coordinating role for ssm countries. interaction between national authorities, represented by national central banks and supervisors, takes place within the financial stability committee ( fsc ). it is our duty to make best use of this forum to encourage a consistent application of instruments. yet it may not be sufficient given that the competent institution for deciding on borrower - based instruments is not always represented in the fsc. in my view, therefore, we have to give serious consideration to strengthening the legal basis of the macroprudential framework for borrow - based instruments, especially within the ssm area. the potential risks from the housing market are too important, and play too pivotal a role for a number of financial markets and for the european financial cycle, to be addressed in such an uncoordinated way. we need the relevant instruments to be based on european hartmann, p. ( 2015 ), “ real estate markets and macroprudential policy in europe ”, journal of money, credit and banking. see box 2 magyar nemzeti bank ( 2014 ), “ report on financial stability ”, november. http : / / english. mnb. hu / root / dokumentumtar / enmnb / kiadvanyok / mnben _ stabil / stabilmnben _ stab _ jel _ 201411 / financial _ stability _ report _ november _ 2014. pdf. bis central bankers ’ speeches law. i therefore strongly support initiatives to establish a consistent minimum set of borrowerbased instruments in the european macroprudential framework. indeed, the review of the crr / crdiv legal framework should be seen as an opportunity to achieve this. systemic risks in the shadow banking sector this discussion so far has dealt predominantly with bank credit. as i indicated earlier, however, financial activity and the financing of the economy in the euro area has been shifting to non - banks. we are seeing an ever greater involvement of insurance companies and pension funds in mortgage and private placement markets and investment funds in equity markets. to give just one figure, non - money market investment funds ’ holdings of