Not surprisingly, during the crisis, 17 of the G20 countries introduced protectionist measures, despite the pledge to avoid them signed in November 2008 by the G20 leaders. However, most of them were very narrow in scope and their impact on the volume of international trade has been negligible. Fundamentally, countries are now more aware that they are interdependent through supply chains and imported inputs.
How can one avoid the reduction of monetary support causing panic on the markets? The choices available to the ECB are too often caricatured by its observers. Some fear that we might traumatise the financial markets if we turn the dial of monetary policy by a millimetre, while others prescribe a forced march towards normalisation. The reality is quite different.