rising, the credit multiplier becomes self - reinforcing downwards. given these pro - cyclicalities, there have been recent proposals by both policymakers and academics to regulate collateral requirements. 1 this is one possible arm of so - called macroprudential policy. within the uk, haircuts on secured financing or otc derivative transactions have been identified as one possible tool for executing macroprudential policy. 2 the uk ’ s new interim financial policy committee, housed in the bank of england, will provide advice to government on possible macroprudential tools over the next year or so. the debate on haircuts as a policy tool is live internationally too. in a recent speech in atlanta, us treasury secretary tim geithner proposed the introduction of international minimum standards for margins on derivatives transactions. 3 this would be akin to the international minimum standards for capital adequacy introduced through the basel agreements. since 1934, the us authorities have had regulatory powers to impose minimum margin requirements on lending against equity and some other assets – so - called regulation t. but these policies have not been used actively, with minimum margins unchanged since 1974. to date, analysis of the macroprudential role of haircuts has been largely descriptive. a recent paper, co - authored with prasanna gai and sujit kapadia, attempts to fill that gap. 4 we for example, committee on the global financial system ( 2010 ), “ the role of margin requirements and haircuts in procyclicality ”, cgfs publications no. 36, geanakoplos, j ( 2010 ), “ solving the present crisis and managing the leverage cycle ”, federal reserve bank of new york economic policy review, august, 16 ( 1 ) and kashyap, a k, berner, r and goodhart, c, “ the macroprudential toolkit ”, forthcoming in the imf economic review. http : / / www. hm - treasury. gov. uk / d / consult _ newfinancial _ regulation170211. pdf. http : / / www. treasury. gov / press - center / press - releases / pages / tg1202. aspx. “ complexity, concentration and contagion ”, which is forthcoming in the journal of monetary economics, vol 58 ( 5 ). bis central bankers ’ speeches develop a model of a banking network, inter - connected through un

jean - claude trichet : welcome message at the annual general assembly of the manufacturers ’ association of israel ( mai ) speech by mr jean - claude trichet, president of the european central bank, at the annual general assembly of the manufacturers ’ association of israel ( mai ), tel aviv, 21 january 2010. * * * dear president brosh, ladies and gentlemen, it is a pleasure for me to extend a welcome message to the annual general assembly of the manufacturers ’ association of israel. your meeting is taking place in challenging times for the global, european and israeli economies. not surprisingly, israel, as a very open economy, has been adversely affected by the global financial crisis. i also note that the israeli economy has been quite resilient compared with other advanced economies. israel can rightfully take pride in its recent economic performance, as well as in its achievements in economic development more broadly. your country has close economic ties with europe and is highly integrated into the global economy, so i think it would be useful to consider two questions : what is the outlook for the euro area economy ; and what are the lessons of the global financial crisis? in the euro area, real gdp growth in the third quarter of last year returned to positive territory following five quarters of contraction. we expect the euro area economy to grow at a moderate pace in 2010. i should add, though, that the recovery process is likely to be uneven, and the outlook remains subject to high uncertainty. the upside and downside risks are broadly balanced. on the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus that has been provided by the authorities. confidence may also improve further and foreign trade may recover more strongly than projected. on the downside, concerns remain as regards negative interactions between the real economy and the financial sector, which may be stronger or more protracted than expected. renewed increases in oil and other commodity prices, the intensification of protectionist pressures and disruptive market movements related to the correction of global external imbalances remain other downside risks for economic developments in the euro area and beyond. budget deficits in euro area countries must be reduced in a timely fashion to maintain confidence in public finances. avoiding protectionism and disruptive market movements related to global imbalances will require a high degree of international cooperation among policy makers in advanced and emerging market economies. this brings me to my second point : what are the lessons of the financial crisis? given the magnitude and the negative