european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, and mr lucas papademos, vice - president of the european central bank, frankfurt, 2 september 2004. * * * ladies and gentlemen, the vice - president and i will now report on the outcome of today ’ s meeting of the governing council of the ecb, which was also attended by the president of the ecofin council, mr zalm, and commissioner almunia. we noted that the information which has become available in recent months indicates that the economic recovery in the euro area has maintained its momentum and should remain firm in the coming quarters. we have also witnessed somewhat higher inflation rates, mainly due to developments in oil prices. at present, our judgement is that although some upside risks to price stability exist, the overall prospects remain in line with price stability over the medium term. accordingly, we have retained our monetary policy stance and left the key ecb interest rates unchanged. the level of interest rates is very low by historical standards, both in nominal and in real terms, lending support to economic activity. we will remain vigilant with regard to all developments which could imply risks to price stability over the medium term. i shall now explain our assessment in more detail, turning first to the economic analysis. the latest data releases confirm that the economic recovery in the euro area is continuing. according to eurostat ’ s flash estimate, real gdp grew by 0. 5 % quarter on quarter in the second quarter of this year, having recorded a 0. 6 % increase in the first quarter. these growth rates are the strongest in the euro area for some time. the latest indicators of output and demand remain consistent with ongoing growth in real activity, increasingly supported by domestic demand, also in the third quarter of 2004. looking ahead, the conditions for a continuation of the recovery remain in place. economic growth outside the euro area continues to be robust overall, even if subject to temporary fluctuations, and should continue to support euro area export growth. on the domestic side, investment should benefit from the positive global environment and the very favourable financing conditions. improvements in corporate efficiency and higher profits are also supporting business investment. moreover, private consumption should continue its gradual recovery, broadly in line with growth in real disposable income which, with the usual lag, should be further underpinned by an increase in employment growth later on. against this background, we expect the

banks ’ bidding behaviour. overall, while the need for enhanced interaction between central banks and supervisory authorities is widely acknowledged, recent events have called into question whether improved interaction in cooperation suffices. in this context, the debate has recently turned towards the future supervisory architecture. in particular, the financial crisis has underscored the urgency of reviewing the eu supervisory framework, which is still based on national responsibilities against the background of increased financial market integration and the growing role of large cross - border financial institutions. in response to these concerns, a high level group was set up under the chairmanship of mr jacques de larosiere with the mandate to examine the allocation of tasks between the national and the european level. the final report of the group, published last february, includes a number of proposals to strengthen both macro - and micro - supervisory arrangements in europe. as regards the arrangements for macro - prudential supervision, the de larosiere report proposes to establish a european systemic risk board under the auspices of the ecb, which should substantially improve the assessment of systemic risks to financial stability at the eu level. by assigning a strong role to central banks, and particularly to the ecb, the report recognises that these institutions should play a leading role in macro - prudential supervision. however, in order for the new board to perform its tasks in an optimal manner, it is important that three key requirements are fulfilled : • first, the ecb must have timely access to all relevant information, including that concerning individual institutions ; • second, risk warnings from the new council should be translated into effective policy action ; • and third, the new council must have a solid institutional and legal basis in order to ensure independence and effectiveness of its decision - making processes. 3. concluding remarks the financial turmoil, which began in the summer of 2007, has developed over time into one of the most disruptive crises that the world has experienced in many decades. this is why from the start of the turmoil public authorities have undertaken interventions in key policy fields, including liquidity management, monetary policy and fiscal policy, which are unprecedented by number and scale. in addition, many initiatives have been undertaken to address weaknesses in the regulatory and supervisory framework in order to provide sounder foundations to our financial systems. despite our best efforts, we cannot yet see the light at the end of the tunnel and key financial markets and economic sectors remain under stress. it would be very difficult to predict when exactly our economies will return to normality,