lorenzo bini smaghi : europe, the united states and the new challenges to the global economy speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at a conference organised by the council for the united states and italy in venice, venice, 11 june 2010. * * * it is a pleasure to attend this workshop, and especially to have an opportunity to consider relations between italy – as well as europe more generally – and the united states. i must admit to having felt, in recent months, a growing frustration to hear it claimed at conferences and to read in articles that the transatlantic relationship is in crisis and is disintegrating – irredeemably. i won ’ t go into the arguments put forward by those who hold this view, but i would rather report on how far it is from reality – at least from the perspective of those working in an institution responsible for the conduct of economic policy. the starting point of my analysis is the common challenge we face, which is to restore sustainable growth after the deepest economic and financial crisis of the post - war period, against a background of great global change. this challenge has been approached by europe and the united states mainly through three lines of action : macroeconomic policies ; financial market reform ; and relations with the other major players in the world economy. i would like to examine these three factors, indicating where perspectives and transatlantic action converge. let ’ s start with the economic situation. i won ’ t dwell on describing europe ’ s economy, particularly that of the euro area, or the us economy. both started to grow during last year, at a pace that looks faster in the us, as is typically observed in this phase of the cycle. domestic demand seems stronger on the other side of the atlantic, thanks to the dynamism of private consumption, which for now remains subdued in europe, where exports are the main engine of growth. the main risk factors underlying the recovery are the same for the two areas, namely : uncertainty about whether growth can be self sustained, without relying mainly on the policies aimed at stimulating demand which have been put in place by most industrial countries in response to the crisis ; turbulence in financial markets, which has shifted to sovereign risk ; unemployment, which remains high, although it seems to have peaked ; the situation on the capital markets, particularly the soundness of banking systems in the aftermath of the economic and financial crisis, and their ability to provide adequate credit to the economy

this increased emphasis reflects changes both in financial markets and in the consumer population. the number of financial products and financial service providers has grown dramatically. a widening array of financial choices offers the potential for great benefits to the public, but also poses temptations. more and more people are gaining access to credit ; indeed, a host of lenders is probably inundating them with solicitations. the public can also select from a wide variety of savings vehicles, each with its special features. ideally, the result of this increase in choice is lower costs and products that more closely match consumer needs. but some consumers are not prepared to confront this array of choices. they lack the financial knowledge to evaluate the alternatives and to see future consequences. they may be too trusting of lenders that present a friendly face and promise quick and easy access to funds, and too suspicious of those that are more deliberative but offer much better deals. newcomers to this country and populations who were previously denied access to credit markets particularly need assistance in coping with the increasingly complex financial system. the federal reserve system recently launched a financial literacy campaign that includes a public - service announcement by chairman greenspan. we have developed a personal financial education web site that contains links to a large number of national, state, and local consumer education resources. on that site one can find information on such topics as on - line banking, how to http : / / www. federalreserveeducation. org / fined / index. cfm. buy a home, and accessing credit reports. individual reserve banks have also developed complementary web sites that include resources specific to their districts. the federal reserve bank of boston ’ s video and booklet on identity theft are among the highlights of the system ’ s financial education offerings. the booklet, in particular, is a best seller. the new england economic adventure continues this rich tradition and also breaks new ground. the adventure, together with the auxiliary lessons and web materials, teaches important economic principles. in particular, it emphasizes the central role of productivity growth in raising standards of living and illustrates what goes into such growth. this is an especially timely lesson right now. as you may know, over most of the past ten years u. s. productivity growth has been about double that of the previous twenty years. over the long term, productivity growth is the key to economic advancement. by way of illustration, the pickup in productivity growth from an average of just under 1 - 1 / 2 percent from 1973 to