The euro, its central bank and economic governance

Contributor(s): Jean-Claude Trichet | The Stamp Memorial Lecture is in memory of Josiah Charles Stamp, an alumnus and former governor of LSE. The recent financial crisis has been a turbulent period for policy-makers around the world. Originating in and mostly affecting the financial sector, it has forced central banks to take unprecedented steps to contain the situation and its fallout for the real economy. Overall, this has been achieved, and economic activity is gradually recovering around the world. Risks remain, however, including systemic risks, and the advanced economies are still a long way from achieving sustainable economic growth and job creation. Jean-Claude Trichet, President of the European Central Bank (ECB), explains how his institution reacted swiftly to the challenges of the financial crisis through non-standard measures. However, at the same time, it has continued to remain faithful to its mandate of maintaining price stability in the euro area over the medium term through standard monetary policy measures. Looking ahead, Mr Trichet also argues that the unwavering actions of the ECB and its decision-making bodies need to be paralleled by a quantum leap in the economic governance of the euro area. The citizens of the euro area want stronger and better coordination of economic and financial policies and are calling for governments to deliver a deeper and more effective economic union.