jean - claude trichet : hearing at the economic and monetary affairs committee of the european parliament speech by mr jean - claude trichet, president of the european central bank, brussels, 8 december 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis de cette quatrieme rencontre avec votre commission au cours de cette annee. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. je vous fournirai ensuite de plus amples informations sur nos operations de politique monetaire ainsi que notre dispositif de garanties. am schluss mochte ich auf das management der finanzkrise in europa eingehen und einige der reformvorschlage fur das internationale finanzsystem hervorheben, die ich fur besonders wichtig halte. danach beantworte ich wie immer gerne ihre fragen. economic and monetary developments since my previous hearing before your committee on 10 september, euro area annual inflation has continued to decline, falling to 2. 1 % in november. with lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy - relevant horizon. risks to the outlook for price stability are more balanced than in the past. unexpected further declines in commodity prices could put downward pressure on inflation, while upside risks to price stability could materialise if the fall in commodity prices were to reverse or if domestic price pressures were to turn out stronger than assumed. turning to economic developments, since september, there has been an intensification and broadening of the financial turmoil, contributing in the third quarter to a contraction of 0. 2 % in real gdp growth compared to the previous quarter. global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters. subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken. as a whole, average growth in 2009 could be between - 1 % and 0 % according to the eurosystem staff

business lines in a situation of financial stress. work has also been initiated to implement this in malaysia. financial institutions are expected to develop a menu of options for recovering from events of severe stress in order to restore business to a stable condition. these plans must be regularly updated to reflect changes in a firm ’ s business model and operational arrangements. at its most basic level, recovery plans are helping financial institutions to better understand their operational and financial interdependencies and how this can affect recovery options that are available to the institution. some institutions are finding through this process that their operations have become far too complex to support credible recovery strategies. these institutions are taking or considering steps to restructure parts of the business to achieve wider options for recovery. indeed, an important development emerging in the recent period has been the more explicit consideration of implications for recovery plans in key strategic decisions, such as decisions to hub operations at a particular location or service provider. as much as organisational resources are put into enhancements of business continuity management, it is important for businesses to always keep in mind the inherent limitations of bis central bankers ’ speeches business continuity plans and not be lulled into a false sense of confidence that these plans may provide. scenarios featured in these plans are often based on assumptions, which are a simplification of reality at best. such scenarios should always be rigorously challenged to account for changing conditions. business recovery or resumption actions should also contemplate a range of conditions to build agility within the organisation to execute required, but potentially untested, responses. firms should expect that they will rarely get to a point of precision in their scenario planning and bcm responses. this does not mean that bcm is necessarily reduced to an exercise in futility. a commitment to continuous improvements in bcm is almost certainly likely to prepare firms better for disasters and tail risk events even if those specific events were not exactly contemplated. this is because the organisation will be naturally better at coming together in a crisis, and would be able to leverage on some of the core elements of response plans that have already been developed and tested. the world today is encountering more extreme disasters such as epidemics and unpredictable weather - related calamities. in our own country, the worst flood disaster experienced in decades last year saw over 250 thousand people displaced with estimated costs of more than two billion ringgit to repair damaged infrastructure. this presents a sober reminder of the responsibility of all corporations to ensure that they are well prepared for