european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, helsinki, 6 may 2004. * * * ladies and gentlemen, it is a pleasure to welcome you to our press conference here in helsinki, where the governing council of the european central bank met today for the ninth time outside frankfurt. i would like to thank acting governor matti louekoski for his invitation and very kind hospitality, as well as the staff of suomen pankki - finlands bank for a perfectly organised meeting. we deeply regret that mr matti vanhala had to resign from his position and we wish him all the best. let me now report on the outcome of today ’ s meeting. on the basis of our regular economic and monetary analyses, we continue to expect that price stability will be maintained over the medium term. accordingly, we did not change our assessment of the monetary policy stance and left the key ecb interest rates at their current low levels. the low interest rates across the entire maturity spectrum are also supporting the economic recovery in the euro area. as always, we will continue to monitor carefully all developments that could affect our assessment of risks to price stability over the medium term. allow me to elaborate on our decision, turning first to the economic analysis. regarding the current situation and the very short - term outlook, the conjunctural indicators available still provide mixed evidence. all in all, they suggest that the recovery of real economic activity in the euro area has continued into 2004, albeit at a modest pace. most recent information has been more encouraging, with the latest euro area survey data offering more positive signals with regard to the beginning of the second quarter. while the latest positive signals need to be confirmed by future developments, they underpin the expectation of the gradual recovery in the euro area continuing and strengthening over time. the conditions for such a recovery are in place. first, global economic growth continues to be robust and world trade has strengthened. the global economic upturn is broadly based, both geographically and across sectors, and thus provides a favourable external environment for the euro area. in this context, we expect euro area exports to grow significantly this year and next. second, favourable financing conditions, improvements in corporate efficiency and earnings and the strength of global demand should help investment. growth in real disposable income should support private consumption, especially since households appear not to face financial constraints that might impede stronger spending. over time,

the bretton woods system collapsed. thereafter, sweden independently adopted other exchange rate regimes, all of which gave greater freedom than the bretton woods system. that resulted in less discipline in wage formation. what then does it mean to have a fixed exchange rate? a fixed exchange rate means that the central bank, with the aid of currency market interventions or its policy rate, stabilises the exchange rate around a target, e. g. a price for the dollar, gold or an average of currencies, whereas under a floating exchange rate regime the exchange rate is determined by supply and demand in the currency market. with a fixed exchange rate, you avoid some of the uncertainty in world trade when countries exchange currencies with each other. there is a limit to how much a currency ’ s exchange rate can vary, which is good for importers and exporters when they are forecasting income and expenditure. the fixed exchange rate can also be seen as a way to achieve price stability. with a fixed exchange rate, inflation in the long term cannot be higher or lower than the inflation rates in the countries with which you have tied your exchange rate. for example, a fixed exchange rate against the dollar would ” force ” us to maintain the same inflation rate in the long run as the us and the other countries whose currencies are pegged to the dollar. were that to fail, our current account balance would deteriorate and we would have to devalue. sweden devalued five times between 1976 and 1982 under a fixed exchange rate ( 1976, twice in 1977, 1981 and 1982 ). that was because sweden in the 1970s and 1980s had higher inflation than the other countries. between 1975 and 1995, swedish inflation averaged 8 per cent a year. real wages rose by only 0. 5 per cent a year. swedish companies ’ competitiveness deteriorated and industrial production dropped. sweden slipped from 4th place in the oecd ’ s standard - of - living league to 18th place – below the average for oecd countries. we became a relatively poor country in europe and the industrialised world. meanwhile, deregulation in the credit market during the 1980s resulted in a sharp expansion in credit, with an accumulation of debt among the general public as a consequence. demand increased but supply was weak and productivity growth low. the economy overheated, inflation picked up and competitiveness was eroded. in 1990, the international economy began to weaken and prices of assets and property fell. the