erkki liikanen : the crisis management role of the imf statement by mr erkki liikanen, governor of the bank of finland and governor of the fund for finland, at the joint annual discussion, world bank group and international monetary fund, istanbul, 6 october 2009. * * * i am honoured to address this distinguished audience on behalf of the nordic - baltic constituency, consisting of denmark, estonia, iceland, latvia, lithuania, norway, sweden, and finland. we are gathered here in istanbul about a year after the dramatic events of autumn 2008 when the financial system came close to collapsing. fortunately, today ’ s meeting is taking place in a calmer setting. dealing with the crisis has been challenging the countries in my constituency are small, open, export - oriented economies. when trade collapsed as a result of the crisis, we were all hit. the crisis has hit the countries in my constituency in differing ways. some have negotiated programmes with the imf that support their efforts to build the basis for sustainable recovery. international cooperation, covering a wide range of policies, was crucial in avoiding a full melt - down of the global financial system. prompt actions by monetary and fiscal authorities and joint international efforts all played a critical role. a well - functioning global financial system is needed to set the stage for economic recovery. although the worst is clearly over in the financial markets, credit channels are still impaired. looking forward, a key question is whether the financial system is able to provide sufficient credit to support economic recovery. for about two years now we have been witnessing the biggest financial and economic crisis since the great depression. solutions have been sought open - mindedly, cooperating on a broad international basis. this has been challenging for policy makers. it will be equally challenging to design and communicate well - timed exit strategies from the extraordinary policy measures that have been taken. finally we are seeing the first signs of global recovery. in the medium term, a rebalancing of the global economy will be crucial in ensuring sustained growth. the fund will play an important role in advising member countries on policies that are also optimal from a global perspective. the fund has carried out major reforms the first full - fledged early warning exercise, launched here at our meetings in istanbul, is one example of a cooperative effort to promote global financial stability. the joint imf - fsb exercise has benefitted from the fund's macro - financial knowledge, complemented by the fsb's regulatory insight. we recognize that

developing economies of the so - called global south. the starting point is solid : we have free trade agreements ( ftas ) in place with 74 countries worldwide, covering over 44 % of our external trade. these countries include major economies, such as japan, south korea and canada. these ftas provide market access to businesses, reduce tariffs and promote trade relationships. moreover, ftas with australia, india ja indonesia are currently being negotiated. 2 / 6 bis - central bankers'speeches right now, we have the choice to conclude the ratification of the mercosur fta, which has been pending for years. this should happen before countries like brazil turn to china, which would not be in our interest. latin american democracies are natural partners for europe, and trade agreements that can strengthen this partnership should be seen as a strategic priority and a geopolitical necessity. the credibility of the eu as a negotiating partners is also at stake. globally, trade is in transformation. protectionism, trade wars and geoeconomic fragmentation in general are the by - products of geopolitical tensions. the pandemic further accelerated the diversion of global supply chains. these developments are likely to increase economic shocks and inflation volatility, and so these are critical issues that central bankers must closely monitor. we are indeed witnessing some signs of trade fragmentation, primarily in two significant ways. firstly, bilateral trade between the us and china has diminished and some supply chains have been relocated from china to southeast asia, mexico and emerging economies in europe, for instance. these shifts aim to mitigate supply chain disruption risks and avoid import tariffs or export restrictions. secondly, russia's war in ukraine has effectively isolated russia from the european union, the g7 countries and their allies. this has resulted in a dramatic reduction in trade between the eu and russia since february 2022. furthermore, china and india are challenging some measures adopted by the eu and the us, like the carbon border adjustment mechanism, the deforestation act and the us ira subsidies as " unilateral trade measures " and barriers to trade. slide 5. domestic value added has decreased in the eu in this complex environment, it is useful to examine whether production is being reshored transferred back home at significant levels. in other words, is globalization truly reversing? our staff analysis of the origins of value added in manufacturing indicates that in the united states, the share of domestically produced value added increased between 2018 and 2023. conversely, in the eu,