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The 2009 Mais Lecture - Reflections on the Financial Crisis

Tuesday, 2 June, 2009

The importance of monetary union has never been greater than during this financial crisis, was perhaps a contentious way for Professor Axel Weber, President of the Deutsche Bundesbank, to begin the 2009 Mais Lecture. But it was pronouncements like this, from one of Europe’s most respected central bankers, which attracted a full auditorium of academics, business leaders and Cass students.

The prevailing approach of world governments, capital-injection and guarantee programmes, has in Professor Weber’s view contributed to stability but has not been able to entirely eliminate uncertainty about banks’ soundness. Any action by policymakers cannot offset the downturn but merely mitigate it.

Professor Weber moved on to provide some context for Germany’s experiences in the recent downturn. Germany has become an open and export-orientated economy over the past decade and in doing so benefitted from the dynamic global environment of the last decade. Recent events have shown that this openness also means a more cyclical overall economy, Germany cannot insure itself against truly global shocks regardless of how diversified its export portfolio is in regional or product terms.

In conclusion Professor Weber praised the way the Eurosystem has responded decisively, to the crisis, but warns that the major bad news is still to come, and the challenge for policymakers will be how to manage the employment impact of the largest post-war recession. Providing a longer-term perspective, Professor Weber argues, is one of the most important lessons from the current crisis. Taking a taking account of financial circles in the upswing as well as in the downturn will be essential for the future.

The annual Mais lecture is regarded as the City of London's foremost event for the banking and finance community, and is attended by senior practitioners and academics. Since its inception in 1978, the Mais has maintained a tradition of prestigious speakers such as Tony Blair; Gordon Brown; Mervyn King, Governor, Bank of England (2005). The 2008 lecture was given by Chancellor of the Exchequer, Alistair Darling.

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