the secretariat to the esrb and give analytical and organisational support. the crisis is forcing us to undertake careful analysis to identify where mistakes were made, and to correct them, even in the face of resistance from the political domain. at the same time, however, we should also identify what has proved itself to be of worth and what should be maintained as is. at the macroeconomic level, as i have already said at another occasion, there is one conclusion that should certainly not be drawn from the financial crisis, namely that higher rates of inflation should be targeted in future. there are no discernible macroeconomic benefits that would compensate for the obvious costs of increased inflation – higher risk premia and higher long - term interest rates, to name just two. and we should never forget that low inflation preserves the purchasing power of our most vulnerable and poorer fellow citizens. the financial crisis has not brought about any change in this fundamental assessment : contrary to the fears of some critics, the non - conventional monetary policy measures taken by the ecb had exactly the desired effect, even in an environment of temporarily negative inflation rates, so that they can now – given the normalisation of the outlook for inflation and the prospect of a general market recovery – be phased - out, step by step. the ecb will uphold its definition of price stability. one characteristic of the ecb and the national central banks of the eurosystem is that their activities are oriented towards the long term. in an environment generally characterised by short - term horizons, the ecb ’ s long - term approach differentiates it from what occurs in both general politics and the private financial sector. it is not surprising that political behaviour in democracies is strongly dependent on election cycles. in the field of fiscal policy in particular, this might encourage short - term action focused on election dates, resulting in a tendency to engage in deficit spending and growing government debt. as emphasised in the political economy literature, this short - term approach is, in fact, built into the political process itself, which demands that political actors are re - legitimised by means of elections at regular intervals. however, short - termism can and should be corrected through fiscal rules that work towards the sustainability of public finances. examples of this include the stability and growth pact and the recently agreed, and much to be welcomed, “ debt brake ” built into german law. activity in the private sector is often governed by the quest for short - term profits. seeking profits

gertrude tumpel - gugerell : the future of reserve currencies speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the saint petersburg international economic forum, saint petersburg, 6 june 2009. * * * ladies and gentlemen : it is my pleasure to participate in this panel of distinguished experts. in particular, i am pleased by the fact that the organisers have gathered around this table both officials from international organisations, central banks and sovereign wealth funds as well as representatives from the academia and the private sector. we are here to discuss a topic which to some may appear as a technical issue for reserve managers but which is indeed broader as it may have repercussions on the global economy and the international monetary system. let me focus in my remarks on the future of reserve currencies on three aspects of the issue. first, i will describe how we assess at the ecb the use of the euro in foreign reserve portfolios. secondly, i will briefly recall the available evidence on the use of the euro in foreign exchange reserves with a focus on recent developments during the global financial crisis. finally, i would like to share with you some general reflections on the key characteristics of international reserve currencies. in general, the international use of currencies is a market - driven process which is determined by independent decisions of private agents and public entities. the ecb takes a neutral position on such matters, i. e. it neither promotes nor hinders the international use of the euro or other international currencies. in the context of reserve currencies, history has shown that the currency composition of global foreign exchange reserves has often evolved very gradually and might be subject to considerable inertia stemming for example from anchor currency and liquidity considerations by central banks reserve managers. can we underpin such considerations also with data for the ten years following the introduction of the euro? the only reliable source on the currency composition of foreign exchange reserves at the global level is imf data which cover only around two thirds of total reserves and do not include assets managed by sovereign wealth funds. let me therefore use this opportunity to encourage more central banks and sovereign wealth funds to disclose such information – on a confidential basis – to the imf. the central bank of our host country, the bank of russia, even publishes the currency composition of its reserves in its annual report and i would like to thank the colleagues for this important russian contribution to greater