erkki liikanen : the country that paid its debt, became an early member of the imf, and joined the eu speech by mr erkki liikanen, governor of the bank of finland, at the 15th maple leaf and eagle conference, university of helsinki, helsinki, 13 may 2014. * * * ladies and gentlemen, it is a great honor for me to be here today at the 15th maple leaf and eagle conference at the university of helsinki. as governor of the bank of finland i have the good fortune to meet a lot of interesting colleagues from other central banks, both from europe and other continents. transatlantic contacts are also close. when the bank of finland, an old institution, organized its 200th anniversary conference in 2011, we had many prominent speakers. let me name just two of them, who both recently have taken up new duties. janet yellen, then vice - chair and now chair of the us federal reserve, while mark carney has moved from being governor of bank of canada to governor of the bank of england. conferences are however not the most typical forum for central bankers to convene. normally we meet bimonthly at the regular meetings of the bank for international settlements in basel, switzerland, and twice a year under the auspices of the international monetary fund, washington dc. personal contacts are in my opinion of utmost importance, especially since the beginning of the global financial crisis in 2007 / 2008. while the crisis has brought many disappointments, international cooperation among central bankers has been vital and has worked beyond expectations. one lesson we have learned is that a financial crisis spreads rapidly from one continent to another. we are all interconnected and even more interdependent than we understood before the crisis. in this sense the theme for you conference, north america in the world, and the world in north america, is more than appropriate. * * * today ’ s speech i will raise three central themes that have to do with finland ’ s transatlantic relations, in a historic perspective. firstly, finland was the only country to fully serve its debt to the united states after world war i. it gave our country a good reputation that is remembered still today. but what was it all about? and what can we and other countries learn from this experience? secondly, finland became a member of the international monetary fund and the world bank as early as in january 1948. how was that possible, when finland ’ s international position was so weak in the cold war environment that we could

for price stability were so high that we needed to act. have jens weidmann and sabine lautenschlager been all too relentless in their criticism? liikanen : no, it ’ s been professional. nobody can claim for not having been heard in the governing council. history will tell whether our timing was right. i hope the economy in the euro area will turn for the better. the germans admire the bundesbank. the blueprint in the creation of the ecb was meant to be the bundesbank – now there seems to be not much left of it. liikanen : i admire the bundesbank too. we all learned the value of monetary policy independence by studying the history of the bundesbank. that is what the ecb fights for. the spirit is there. when inflation rates were too high, i have been one of the first to support higher interest rates. but if interest rates are close to zero, and we have protracted low inflation and deflationary risks, that requires early action. you have to act while you can. bis central bankers ’ speeches the bundesbank thinks the ecb is going too far. liikanen : there is a new question for central bankers : if our inflation is too low should you react with the same vigor as when it is too high? should you? liikanen : i am a hawk in both directions, fighting inflation and preventing deflation. there are people who say zero inflation is fine. i think zero inflation makes the economy vulnerable without any buffers. the ecb objective of below but close to 2 percent in the medium term is safer. we haven ’ t had this kind of a problem before, in the postwar period. rather, inflation was the problem, and the bundesbank has a great record there. now we talk about the prospect of too low inflation for too long. we have to go far back in history to the 1930 ’ s to understand the dangers of deflation. you would not believe how often the history books are being quoted among central bankers in various discussions. but buying government bonds always has the odor of financing government deficits? don ’ t you agree? liikanen : no, not when we are doing it the way we decided to do it. we only buy bonds on the secondary market, we buy according to the capital keys of the eurosystem members, we buy maximum 25 percent of each issuance and maximum 33 percent of each issue