The euros in our pockets are, after all, only pieces of printed paper. Their value lies in the shared conviction that this so-called fiat money can be used as a means of exchange, as a unit of account and above all as a store of value. “All money is a matter of belief ”2.
This belief stands and falls with the credibility and trustworthiness of the central bank. This, in turn, rests on its words and deeds. Maintaining this trust is an enormous responsibility. Consistent communication and policy action can create confidence and popular support. By contrast, miscommunication and policy mistakes can create excessive volatility in markets. In extreme cases, the currency itself may be at risk.