jean - claude trichet : the ecb's response to the crisis statement by mr jean - claude trichet, president of the european central bank, at the european american press club, paris, 20 february 2009. * * * ladies and gentlemen, please allow me first of all to thank the european american press club for organising this event and giving me the opportunity to share with you some thoughts on the financial turbulence. i will describe, in this context, the steps taken by the european central bank. i had the pleasure of addressing you in january 2005, when i talked about the euro ’ s successes and challenges. four new countries have since joined the euro area, with the result that 329 million citizens now share the same currency. the financial turbulence intensified significantly in september of last year and has quickly spread from the financial sector to the real economy. in sharing my thoughts on this subject, i will talk about the role of the operational framework of the eurosystem, which comprises the european central bank and the national central banks of the euro area. i will describe the measures implemented by the european central bank in response to this difficult and unprecedented situation, and i will stress the role played by cooperation between central banks at the international level. the current turbulence poses a serious challenge to the financial system as a whole and to economic policy - makers and regulatory authorities around the world. since august 2007 central bankers have sought to address the increased volatility and risk in financial markets. this environment deteriorated considerably in september and october of last year, when several market sectors effectively closed and a systemically important financial institution went bankrupt. the primary objective of the european central bank is to maintain price stability ( defined as price increases below, but close to, 2 % ) over the medium term. achieving this objective involves more than just establishing our monetary policy stance and setting key interest rates. under our operational framework, we also implement our monetary policy by conducting open market operations with a view to steering short - term interest rates in the interbank money market. since the financial market turbulence began in august 2007, the eurosystem ’ s open market operations have, in addition to steering short - term interest rates, also sought to ensure that solvent banks have continued access to liquidity. our endeavours in this area have focused on helping to alleviate the tensions hampering the functioning of the money market. the eurosystem ’ s “ intermediation role ” has grown significantly over the last five months. we are now providing –

the deposit facility. these measures have proved effective in overcoming the liquidity shortage in the interbank market. however, they cannot eliminate the increased concerns regarding credit risk. in this regard, the conditions in the money market have not yet normalised and remain strongly affected by an elevated degree of risk aversion. the increase in the eurosystem ’ s intermediation role has proved necessary in response to the current dysfunctional nature of the money market, but this cannot – and must not – be regarded as anything other than a temporary measure. the eurosystem wishes, of course, to see a return to interbank lending and traditional intermediation activity by banks. the ecb ’ s recent decision to return to 200 basis points the corridor formed by the interest rates on the standing facilities either side of the rate on the main refinancing operations aims to stimulate interbank activity. in this respect, we are observing a reduction in banks ’ demand for refinancing in our open market operations and a correlated decline in recourse to the deposit facility. in parallel, we are witnessing an increase in the volumes underlying the calculation of the eonia. cooperation between central banks faced with the development of the financial market turbulence, central banks have already taken numerous steps to counter systemic liquidity risk, demonstrating their determination in this regard on numerous occasions. since december 2007, the ecb, thanks to a swap agreement with the us federal reserve system, has been providing euro area banks with liquidity in us dollars in exchange for eligible collateral. this exceptional measure seeks to alleviate the tensions observed in short - term funding markets. since the launch of these operations, the range of maturities covered has grown and the amounts allotted have increased, with financing being allotted by an increasing number of central banks. as regards the eurosystem, the framework for this facility was extended in october of last year when the ecb decided, in agreement with other central banks, to offer financing in us dollars at various maturities by means of fixed rate tender procedures with full allotment. since october 2008 the ecb has also provided euro area banks with liquidity in swiss francs through a swap agreement concluded with the swiss national bank. the financial turbulence has shown that, by stimulating confidence, particularly in periods of considerable uncertainty, cooperation between central banks in various areas can prove an effective response to both national and global challenges. conclusion ladies and gentlemen, i would like in conclusion to say a few words about a most important