FRANKFURT (MNI) – Following is the text of a European Central Bank
President Jean-Claude Trichet’s speech at the Institute of International
Finance, Spring Membership Meeting in Vienna, Austria:

I remember vividly when the Institute of International Finance
(IIF) was founded back in 1983 at the time of the international debt
crisis. One of its key early tasks was to inform members about
fundamentals and policies in borrowing countries. Since then, the range
of the Institute’s activities has broadened a great deal.

I have continuously interacted with the IIF since its beginning; in
the 1980s as chairman of the Paris Club, later as Governor of the Banque
de France and over the last years as President of the European Central
Bank. And as Co-Chairman of the Group of Trustees of the Principles, I
enjoy the regular events together with distinguished colleagues from the
public and private sectors.

I want to thank Charles Dallara, in particular, for his dynamism
and constant efforts in fostering dialogue between the private sector
and the official sector. The IIF gatherings always provide a fantastic
opportunity for stimulating exchanges of views on the international
financial system.

When preparing my remarks for tonight, I looked at my text from the
25th Anniversary IIF Membership Meeting in October 2007. At the time, I
concluded that it is the task of all the stakeholders of the global
financial system [] to live up to their respective responsibilities and
contribute appropriately to the stability of this system.

I trust that all will agree that this statement remains valid
today.

* * *

In recent weeks, we have had difficult news not only on the
financial system but also the ecosystem the news that the oil spill in
the Gulf of Mexico is spreading ever wider from the riggers who lost
their lives in the explosion to their employers, local communities,
environmental agencies and public policy-makers. Similarly, the
financial events of the last three years, which began in a seemingly
small part of the US housing market, have touched all of our lives and
come to test the resilience of our whole system of global economic
governance.

The financial crisis has tested the business models and risk
management systems of market participants, and the rules and structures
of the markets in which they operate. It has tested the preparedness of
central banks and governments to take unprecedented support measures to
preserve confidence in markets and the economy. And it has tested the
ability of the institutions of global governance to restore financial
and economic stability.

Just as the Deepwater Horizon oil spill is doing for environmental
protection and natural resource management, the financial crisis offers
many lessons for management of the global economy lessons about
private sector incentives, lessons about regulation and lessons about
global interdependencies and the ever-growing need for effective policy
coordination.

Tonight, I would like to share with you a few thoughts on the
strengths and weaknesses of our system of global governance.

* * *

But before doing so, let me say a few words on the current
situation in Europe.

In recent weeks, the euro area governments and the ECB were once
again called upon to demonstrate their ability to take swift and
essential action to face up with exceptional circumstances.

In 2008, the ECB decided on unprecedented measures when private
financial intermediation was first impaired and then on the verge of
collapse, and we restored it to its prime function. On both sides of the
Atlantic, we had to cope with impaired money markets. We set the
conditions for banks to resume lending to each other and to their
customers. We helped reconstruct the market when it had disappeared. And
we laid the foundations for the nascent recovery to start and
consolidate.

Throughout these actions, the ECB has maintained price stability
and the stability of inflation expectations. A month ago, we sprung into
action for a second time. It was for the same reasons. Once more,
private financial intermediation often secured by government paper
was threatened. The market for government paper the basis for the
pricing of many financial assets, from fixed-income instruments to
equity was seriously impaired.

We judged and we continue to judge that our monetary policy
stance was appropriately tuned to the conditions and the prospects of
the broader economy. But once more as in the autumn of 2008 we could
see that the transmission mechanism was not functioning sufficiently
well to channel our policy intentions to the broader economy.

Therefore, we intervened. Our Securities Markets Programme is
targeted to those segments of the euro area government debt markets that
are most dysfunctional. The aim is to restore a precondition to our
primary function of accomplishing price stability in the medium term.

At the same time, we have taken note of the commitment of the euro
area governments to take all measures needed to meet fiscal targets this
year and the years ahead, and that each one of them is ready to take the
necessary measures to accelerate fiscal consolidation. And we are in
close contact with the Commission and authorities to verify that further
convincing and concrete consolidation and reform strategies are prepared
and implemented.

-more-

(1 of 3)

** Market News International Frankfurt Bureau: +49-69 720142 **

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]