jean - claude trichet : the integration of the single market for financial services - the eurosystem perspective keynote speech by mr jean - claude trichet, president of the european central bank, at the cesr conference “ europe ’ s single market in financial services : under construction or fully integrated ”, paris, 6 december 2004. * * * ladies and gentlemen, it is a great pleasure to be here at the first committee of european securities regulators ’ ( cesr ) conference with such a distinguished audience. this is certainly the right place to address our common objective of fully developing a “ european single market ”. the process of financial integration is a very challenging and complex endeavour which results from the effective interplay between public and private action. public authorities, both national and european, do play an important role in ensuring that basic conditions are in place for market participants to expand their cross - border activities. these conditions include an adequate framework of regulation, supervision and financial stability. whereas public action is necessary, the concrete realisation of financial integration rests eventually on the initiatives of market participants to exploit the opportunities offered by the institutional framework. in this context, we can assert that significant progress has been achieved in the pursuit of financial integration in europe so far but the final goal of a single financial market has not been fully achieved yet : on the side of market participants a fully fledged pan - european dimension of market activities remains to be achieved. on the side of public authorities the basic components of the institutional framework are already in place, but they need time before fully producing the desirable results. i would like to focus my contribution on the integration of the european securities markets, emphasising the priorities for further public action from a eurosystem perspective. the interest of the eurosystem in the integration of securities markets the eurosystem has a clear interest in the integration of securities markets. first of all, an efficient and well - integrated financial system is crucial for the smooth transmission of monetary policy in the euro area. securities market is a particularly relevant area, since the eurosystem ’ s monetary policy operations need to be fully collateralised. the harmonisation of national laws and practices in the field of securities - which is one important element to further integration in the securities markets enhances the effectiveness of the eurosystem ’ s collateral policy. second, the eurosystem ’ s monetary policy operations also rely heavily on the smooth delivery of securities. securities settlement systems should ensure that such a smooth delivery both at a national level and

context in which the ecb ’ s strategy was designed. i should like to make two observations. first, the range of approaches employed by ncbs in what is now the euro area was considerable. nevertheless, once the commitment to price stability was affirmed, each of these approaches achieved a large measure of success. the convergence of inflation rates to low and stable levels across the euro area in the 1990s was a significant - and, in many quarters, unexpected - achievement. in my view, this experience offers a powerful illustration that there are several ways to achieve and maintain price stability. the strategy adopted by a central bank should reflect the circumstances that it faces, including the initial conditions and consequent need for transition. those who claim that there is only one acceptable or efficient way to operate monetary policy fly in the face of history and experience. second, on the basis of our investigations of these various approaches conducted at the emi, we concluded that the differences among various central bank strategies - differences which are often highlighted in the academic and journalistic debate - are much less important than the similarities. certain key elements - for example, affirming a commitment to the objective of price stability ; defining this objective clearly ; evaluating a broad range of indicators, including monetary aggregates, real and financial variables and macroeconomic forecasts - were, in fact, common to all successful strategies. taking note of these two observations, the governing council of the ecb adopted a strategy which aimed to maintain some continuity with the strategies pursued by ncbs in the euro area prior to monetary union while, at the same time, ensuring that the new and distinct challenges facing monetary policy in a wholly new currency area were appropriately addressed. we recognised at the outset that the key feature of a successful strategic framework for monetary policy can be described in very simple terms. monetary policy must always be determined in the manner which best serves the maintenance of price stability over the medium term. in taking monetary policy decisions with the goal of price stability in mind, the governing council relies on the information about the economic situation and the threats to price stability that is revealed by a thorough analysis of a very broad range of economic indicators. as ncb experience has demonstrated, the relevant set of indicators is potentially very wide. in consequence, the ecb adopts a “ full information ” approach, ensuring all the relevant information is encompassed in the analysis. to impose some structure on this body of information, these indicators are organised in the context of the strategy ’ s two pillars.