Speech by Jean-Claude Trichet, President of the ECB President of the European Central Bank
Dear Ladies and Gentlemen,
It is a pleasure for me to be here today and share with you some thoughts on how the European Economy can succeed in an increasingly globalised world. This question is as old as globalisation itself and deeper thoughts on how economies can succeed in the presence of increased trade and integration date at least back to David Ricardo (1772-1823). As you know, on the basis of a contract between England and Portugal on trade in wine and cloth, he showed in a model containing just these two goods and the production factor labour, that trade can be beneficial for both countries even if one country has an absolute advantage in producing both goods, that is when it has a relatively lower labour input in producing both goods. Although on first sight absolutely simple, Paul Krugman praised Ricardo’s idea as ‘‘[..] truly, madly, deeply difficult [..] but also utterly true, immensely sophisticated - and extremely relevant to the modern world’’. [1] Today, more than two centuries later, we still ask how countries should position themselves to gain from trade and integration, but the focus has become a global one, with goods and services, capital and information surrounding the world at a speed none of us would have imagined only a decade ago.
For the euro area countries, the change in their economic environment has been particularly marked over the last decade: while being increasingly integrated into the global economy, they are part of the European Union that witnessed a substantial enlargement in recent years. And they are closely integrated in EMU, where now altogether 13 countries share the same currency.
Against this background, I would like to split this exposition into two major parts. First, I would like to review some stylised facts on the features of the euro area’s integration into the global economy and how this has changed over time. Second, based on how the euro area has coped so far in its increasingly globalised environment, I would then like to draw your attention to structural reforms that I consider decisive for the euro area to remain competitive and to keep pace with its main competitors worldwide.
See full Speech.
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