jurgen stark : economic recovery and exit strategies speech by mr jurgen stark, member of the executive board of the european central bank, at the debate on “ the post - crisis strategy for growth and jobs ” and “ modernisation of the global financial architecture ” between the committee on economic and monetary affairs of the european parliament and national parliaments, brussels, 16 march 2010. * * * ladies and gentlemen, economic situation and outlook in autumn 2008, the world entered the worst financial crisis and the most severe economic downturn since the end of the second world war. since spring 2009, financial market conditions have improved. economic growth has resumed in most countries, albeit very moderately in many advanced economies. these improvements have largely resulted from massive support measures taken by governments and central banks. likewise, we have recently seen further improvements in the outlook for the global economy. however, uncertainty is still high, as both fiscal stimuli and the inventory cycle, which are currently supporting growth in many countries, are transitory and as there remain risks to the financial sector. in the euro area, recent information indicates that recovery is still on track. the global recovery that is underway and the positive impact of the policy responses to the financial crisis are the main drivers behind this development. however, ongoing balance sheet adjustments in the private sector, which are necessary, are likely to weigh on growth, just as low capacity utilisation will weigh on investment. in the same vein, weak prospects for the labour market will dampen consumption growth. therefore, the euro area economy is expected to grow at an only moderate and most probably uneven pace in 2010. this is in line with the latest projections by ecb staff [ who predict real gdp growth of between 0. 4 and 1. 2 % for this year and between 0. 5 and 2. 5 % for next year ]. the governing council views the risks to this outlook as broadly balanced. as regards price developments, inflation and inflationary pressures have remained low over recent months. inflation stood at 0. 9 % in february. the outlook for inflation is in line with price stability and the risks to this outlook remain broadly balanced. more specifically, we expect inflation to stay at around 1 % in the near term, and to remain subdued over the policy - relevant horizon, largely on account of the abundance of idle resources and the moderate recovery. this is in line with the projections by ecb staff. our monetary analysis confirms the assessment of low inflationary pressures over the medium term, with money and

those of the imf, both will attain wider acceptance and legitimacy. success in the ambitious tasks of the g20 can only be welcomed by the rest of us. however, it is a weakness that the members of the g20 represent only themselves. virtually entire groups of countries and regions are left out. they have no voice and no representation in the work of the g20 or in the institutions which it chooses to set up to further its agenda. this is at variance with the principles of multilateralism and international cooperation that have prevailed since the end of the second world war. over time, this could easily weaken not only the g20 process, but also the imf as it will be perceived as increasingly guided and controlled by the g20. a strong institution like the imf must be at the centre of multilateral economic and financial cooperation. virtually all the countries of the world participate and are represented in the imf. to be able to continue to play an effective role, the imf needs to enjoy confidence and trust, and to be seen as having a legitimate structure of governance. last but not least, the imf needs to be financially strong, to have at its disposal financial resources commensurate with its tasks, including the ability to provide prompt and significant financial support when needed. in closing, i would emphasise certain key principles : first, systemically important countries need to collaborate effectively on consistent economic policies. their success is vital not only for their own good, but also for that of others, including small open economies. second, this collaboration should be anchored in a multilateral and statutorybased system of representation, for example through constituencies, where smaller countries would participate, even if indirectly. third, the constituencies should have rotating representation, where small countries, at least periodically, could participate directly. thank you for your attention.