jorg asmussen : building trust in a world of unknown unknowns – central bank communication between markets and politics in the crisis speech by mr jorg asmussen, member of the executive board of the european central bank, at the european communication summit 2012, brussels, 6 july 2012. * * * ladies and gentlemen, it has been said that “ there have been three great inventions since the beginning of time : fire, the wheel, and central banking ” 1. central banking has become my business since january this year, but i feel i am getting my fair share of the other two as well : being behind the steering wheel of the ecb during this crisis turned out to be in the line of fire. you invited a central banker to speak at this year ’ s european communication summit. thank you for giving me the opportunity to share some thoughts with you on a very relevant topic : central bank communication in the crisis. communication is an essential and powerful policy tool of central banks. this is because the physical “ product ” of a modern central bank is something with little intrinsic worth. the euros in our pockets are, after all, only pieces of printed paper. their value lies in the shared conviction that this so - called fiat money can be used as a means of exchange, as a unit of account and above all as a store of value. “ all money is a matter of belief ” 2. this belief stands and falls with the credibility and trustworthiness of the central bank. this, in turn, rests on its words and deeds. maintaining this trust is an enormous responsibility. consistent communication and policy action can create confidence and popular support. by contrast, miscommunication and policy mistakes can create excessive volatility in markets. in extreme cases, the currency itself may be at risk. and with it the value of the peoples ’ savings. it was not always obvious that central banks and communication should be mentioned in the same sentence. central banks used to be secretive places. they used to surprise the markets with their policy moves. they used a language that made the oracle of delphi appear positively accessible : alan greenspan is on record as saying : “ if i seem unduly clear to you, you must have misunderstood what i said ” 3. those days are over. central bank communication has become a very dynamic discipline. by deliberately steering expectations in financial markets with their communication, central banks let the markets do part of the job of transmitting their policy signals. the crisis was a game

longer term challenges might never be addressed. the immediate pressure subsides, and incentives for governments weaken. more than once did we witness this during this crisis. by contrast, if the fire - fighting in the short - term does not succeed, there may not be a longer term to think about. george macdonald, 19th century scottish writer jacques attali 26 / 11 / 2011 reuters, 30 / 11 / 2011 bis central bankers ’ speeches our communication is walking a tightrope : markets need reassurance that the ecb will do what is within its power and mandate to guarantee that the euro will not to fail. at the same time, governments need to have the right incentives to tackle the longer - term challenges. conclusion ladies and gentlemen the crisis was a game changer in the communication of central banks. navigating between markets and politics has shifted the goalposts of the ecb ’ s communication. we are facing up to this new environment and its challenges. we are engaging more. we are explaining more. the changed environment, including the spread of new media, might actually be an opportunity in this respect. that said, i would not expect every member of the ecb governing council to open a twitter account soon or to accept you as friends on facebook. let me close with a word of caution. the ecb has gained stature during this crisis. the people and the markets look to the ecb for solutions. but there should be no illusion that the ecb can single - handedly ensure a plain sailing for our economies and the markets. there are limits of what we can do, and what we know. “ central banks do not have divine wisdom. they try to do the best analysis they can and must be prepared to stand or fall by the quality of that analysis ” 9. rest assured that we will continue to do this, and to fulfil our mandate. not least to make sure that central banking remains up there in the list of the three greatest inventions. thank you very much for your attention. eddie george, former governor of the bank of england bis central bankers ’ speeches