Emerging markets and Mediterranean economies in the global economy Today we are celebrating the 50th anniversary of Bank Al-Maghrib. This is also an occasion to reflect on the role of the Mediterranean region, and on the role of emerging market economies in general in the global economy. The growing importance of these economies, including those in this area, has profound implications for the euro area and the rest of the world. I would like to share my thoughts with you on this phenomenon. The growing role of emerging market economies The global financial crisis is slowing the growth of the emerging market economies. Only a year ago, some observers were still saying that these economies were likely to decouple from the downturn stemming from the advanced economies. Today it is obvious that this has not happened. Most emerging markets are affected by the crisis through real or financial channels. Many sectors have been severely hit by the global turmoil, for instance, the automotive, textile, building and tourist industries. In addition, remittances which, for many emerging markets, are an important source of revenue, are vulnerable to the downturn in host countries, even though they tend to be a relatively stable source of income. It is too  4  BIS Review 66/2009  early to say when emerging market economies will bottom out of the global financial crisis, but some recent data, particularly for Asia, are somewhat encouraging.
In this context, I would like to underline that since the introduction of the euro in 1999, the ECB’s quantitative definition of price stability – an inflation rate of below, but close to, 2% in the euro area, over the medium term – has proved to be an invaluable asset. It has guarded against undesirably high inflation and against deflation. Long-term inflation expectations in the euro area, whether based on surveys or extracted from financial indicators, have been and continue to be firmly anchored at levels consistent with our definition of price stability. Inflation expectations have been exceptionally resistant to sudden upward short-term price changes, and we have ensured that is also the case with sharply falling inflation. Non-standard measures In addition to reducing interest rates, we have taken exceptional policy actions in response to the crisis – “non-standard” measures related to liquidity management. At the very start of the money market stress in August 2007, the ECB reacted within a few hours and temporarily provided additional liquidity to banks with immediate liquidity needs. We were in fact the first central bank to take non-standard measures. When in mid-September 2008 the crisis intensified and interbank trading came to a virtual halt, the ECB engaged in a new mode of liquidity provision. We started to provide refinancing well above the levels that banks had absorbed to fulfil their reserve requirements in normal times. Our approach comprises three main “building blocks”. •  We significantly adapted our regular refinancing operations.