jean - claude trichet : monetary policy in uncertain times speech by mr jean - claude trichet, president of the european central bank, at the bank of finland 200th anniversary conference, helsinki, 5 may 2011. * * * ladies and gentlemen, it is a pleasure to have the opportunity to speak at your conference on monetary policy. it is remarkable to think that the bank of finland will celebrate its two hundredth anniversary this year. the ecb, as the youngest central bank in the world, but with such an extraordinarily solid historical legacy in the eurosystem, looks at such a storied history in the european monetary team with pride. this conference occurs at a point in time when central banks and governments of the advanced economies continue to face a wide range of challenges. i would like to start by reflecting in front of you on a challenge that, at first sight, may seem not directly related to monetary policy : strengthening economic governance in the euro area. strong economic governance – and therefore closer economic union – is however the fundamental counterpart to the single monetary policy. with a centralised monetary policy but decentralised fiscal and economic policies – in the absence of a federal institutional framework – those policies have to be placed in a solid framework and appropriately coordinated. the duty of public institutions is to fulfil their mandate and, by doing so, to meet the expectations of the citizens. the ecb ’ s governing council has done so and fulfilled public expectations in line with its mandate. citizens in europe expect overall stable prices and their purchasing power to be maintained. over the first 12 years, the ecb has delivered an average annual rate of inflation of 1. 97 %. citizens expect a stable economy and public authorities that are alert and effective in combating crises. the ecb has taken unprecedented steps to mitigate the effects of the recent crisis on the real economy by ensuring the flow of credit to the households and firms and preserving financial stability – of which i will talk more later. in the field of economic governance, however, public institutions still need to make a “ quantum leap ” to meet public expectations. european citizens recognise the value of closer economic cooperation, particularly those in the euro area. surveys indicate that, on average in euro area countries, more than four out of five euro area citizens are in favour of greater policy coordination between countries to overcome the crisis. this is something, which i consider very important : citizens want a stronger and better coordination of economic and financial policies in

far more rigorous. we need automatic sanctions for excessive deficits. the entire process – from the discovery of looming budget difficulties to the actual imposition of penalties – should be automatic. we saw in the past all the dangers of the complacency of governments. question : is it conceivable that a euro country might leave the single currency? trichet : no, that is entirely unrealistic. there ’ s not even any provision for it in the eu treaty. the euro area is a community that shares the same destiny : each member is dependent on the others. question : why is the ecb taking such a tough stance against a rescheduling of greece ’ s debt? trichet : the adjustment and reform programme agreed by the eu and the international monetary fund with greece does not envisage restructuring. greece must implement the programme fully and rigorously ; this is very important to correct the errors of the past and pave the way for sustainable job creation. bis central bankers ’ speeches question : many greeks are not accepting this reform programme and taking to the streets. trichet : it is never easy when a country has to put right many years of economic and financial mismanagement. greece has lived beyond its means for years while continually raising public - sector pay. it is absolutely essential to reform the country so that it can stand on its own two feet once again. it is in the greeks ’ own best interests that growth is generated and jobs are created again in future. question : in germany, there is growing discontent among politicians and taxpayers about the billions upon billions of assistance. does that worry you? trichet : when we decided to have a single market with a single currency, we created a strong interdependence. if a member gets into difficulties – despite the surveillance which was supposed to be exercised by the other governments – it is the responsibility of all other countries to oversee the fiscal and economic adjustment. where necessary, they can support the adjustment, as the imf does, with non - concessional loans under strict conditionality. question : many people on the streets think otherwise. they ’ ve been saying things like : “ if we give greece even more money, then we don ’ t have it here at home – for tax cuts, for example. ” what do you say to the german people? trichet : i think it is certainly right to say that very strong conditionality is of the essence, and that the loans complementing imf