system ; and third, the close links with the real economy and the potential for strong feedback effects. in short, the crisis has revealed the fundamental importance of systemic risk. the purpose of macro - prudential supervision is to identify sources of systemic risk and recommend remedial action. in the eu, this will be the task of the european systemic risk board ( esrb ). the members of the ecb ’ s general council will be voting members of the esrb, together with the three heads of the envisaged european supervisory authorities and a member of the commission. moreover, the body will comprise all national supervisory authorities. the ecb, as an institution of the european union as a whole, as an institution of the 27 eu member states, has been invited to provide support to the esrb. the ecofin council concluded that the ecb should provide analytical, statistical, administrative and logistical support, in close cooperation with all the national central banks from the 27 states. the ecb is prepared to bring to the benefit of the esrb, with the participation of all the members of the ecb ’ s general council, the macroeconomic, financial and monetary expertise of all eu central banks. the legislative proposals are currently being reviewed by the european parliament for a decision later this year. i am confident that the esrb can make a very important contribution for the overall stability and functioning of the eu ’ s financial system. conclusions in conclusion i would like to stress four points. first, global governance is of the essence to improve decisively the resilience of the global financial system. we avoided a major depression but it was a close call. governments had to support the financial sector by putting at risk taxpayers ’ money for the equivalent of around 25 % of gdp on both sides of the atlantic. this as unprecedented. i am convinced that, if we do not reinforce significantly the resilience of the financial system, our democracies will not accept for a second time such a very large scale of rescue operation. second, a characteristic of the recent turbulences is not only that they displayed a high level of unpredictability but also an extreme rapidity in the succession of events characterising the unfolding of the crisis. global governance today must demonstrate a capacity to coordinate with agility and, where necessary, to decide extremely swiftly. this is also unprecedented. third, the crisis has had some paradoxical effects : on the one hand it has unleashed a tendency to reengage

continuation of previous best practice, while at the same time incorporating insights from economic theory and the experience of other central bank. i think it is fair to say that the strategy has served us well. the clearest evidence of this is the high credibility which the ecb has enjoyed since its inception. the historical fact that, at the time of the introduction of the euro, market interest rates on instruments denominated in euro all along the yield curve were to be aligned with the lowest – and not with the average – rates prevailing prior to the euro was not foreseen by many observers prior to stage iii. the historically low level of short, medium and long - term market interest rates was unthinkable in some countries, which had experienced much higher inflation in the past. in my view, the incorporation of monetary analysis into our monetary policy strategy served, in the eyes of the global market, as an anchor for expectations that in no small way contributed to our success in building and maintaining credibility. the monetary policy strategy of the ecb announced in october 1998 explicitly recognises the monetary nature of inflation by assigning an important role to money in the formulation of monetary policy decisions aimed at the maintenance of price stability. as prof. issing explained to us in detail, there were and still are many good reasons to do so. milton friedman ’ s famous dictum that “ inflation always and everywhere is a monetary phenomenon ” is one of the central tenets of economic theory. on the basis of the discussions at this conference, i draw the conclusion that there is no disagreement in the economics profession on this central tenet, but a lot of different views on how to organise the monetary analysis so that it has an appropriate influence on interest rate decisions. and this is the second issue mentioned at the opening of the conference. as was pointed out by prof. christiano and his co - authors rostagno and motto, including informational asymmetries, transactions costs and financial frictions in “ state - of - the - art ” macroeconomic models allows to better reflect the role of money and credit aggregates within such frameworks. i found compelling the argument that monetary analysis be used to monitor ( and possibly offset ) macroeconomic risks which are not related to price stability at shorter horizons, but which may nevertheless have important consequences for maintaining price stability over the medium and long run, like risks to financial stability. on this point in particular lucas papademos ’ remarks yesterday evening were particularly stimulating. although