jean - claude trichet : economic diversity on both sides of the atlantic speech by mr jean - claude trichet, president of the european central bank, at the us sciences po foundation annual benefit, new york, 16 june 2011. * * * ladies and gentlemen, it is a great pleasure for me to speak to you here tonight. the past few years have been a testing time for the economies of both the united states and europe. we were faced with the worst financial and economic crisis since the second world war. still today – on both sides of the atlantic – we are dealing with the consequences of the crisis – for economic growth, for employment and for government finances. the crisis has also exposed the united states and europe to a number of asymmetric shocks – in which different parts of our economies have had a wide diversity of experience. some countries within the euro area are the particular focus of market attention at the moment as a result of their sovereign debt issues. some observers have been wondering how diversity can be dealt with in europe ’ s economic and monetary union ( emu ), what it means for monetary policy and whether the variations in economic conditions are aggravated by product and labour market rigidities. it has often been argued that economic diversity or heterogeneity is very significantly larger in europe than in the united states. we at the european central bank ( ecb ) have been looking closely at the degree of diversity in the two large, continental advanced economies on either side of the atlantic. and some of the findings from this comparison are quite interesting. because they show that economic diversity within the two currency areas is very similar in many ways. the analysis also shows that, in fact, in a large number of respects the two economies are similarly diverse. i would like to share some of the key insights of this analysis with you tonight. i. economic diversity in the euro area and the united states the united states and europe are often compared. this is quite natural. americans and europeans share a common cultural legacy. but our two economies, and i am speaking here of the economy of the euro area on our side, are also similar. both are of similar size, in terms of population and in terms of economic output. both have closely integrated financial and product markets. and both have a single currency. let me begin my comparison with an economic indicator that is particularly close to a central banker ’ s heart : inflation. in historical terms, overall inflation has been low and stable in both the united

two years. but the question now is : is it getting worse? in recent weeks, compared with the worst - case scenario, there ’ s been some optimism on the us - china trade relationship. that said, there remains a long - term discussion to be had about whether the world will restore its commitment to a global trading system, or whether, over time, we will see a bigger set of barriers that limit global trade. how could a hard brexit affect the eurozone ’ s fragile economy? a deal has been agreed between the uk government and the european union, which of course will be tested in the next election. the worst - case scenario of a no - deal brexit in the short term has been eliminated and the uncertainty over it is fading. but even under the deal there is going to be a more challenging economic relationship between the united kingdom and the eu27. that is regrettable and it ’ s damaging, although – as the united kingdom is a mid - sized economy – more of the damage will be in the united kingdom than in the eu27. there is a big discussion about the risk of a secular stagnation in europe. you rule out a 1 / 6 bis central bankers'speeches recession in the short term, but do you see this risk of a “ japanese scenario ” in the long term? the bigger issue with secular stagnation is not that europe would have soon a recession ; it ’ s that europe and the wider world might grow at a very slow pace. it remains a relevant discussion because the big question is : are we going to grow at a low rate of maybe 1 % a year? or are we going to see a better performance than that? a lot depends on that in terms of living standards. one way to look at the issue – and i think this is very important – is that governments have a lot of opportunities in this environment because the decisions they make in terms of their policies towards business, their policies towards education, their policies towards employment, all of this matters very much. essentially, if the policy choices by governments are more favourable to economic performance, then some of this stagnation fear may fade. do you mean countries that have a fiscal margin to use investments to boost growth, like germany, should act? that ’ s one element, but the other element which is for everyone, all countries – for germany, for italy, for every country – is that there are many non - financial policies that matter.