Mr Trichet told the executive gathering that the swift decisions taken by central banks in advanced economies were to thank for avoiding an economic slump worse than the Great Depression of the 1930s but noted that the crisis had exposed structural defects of advanced economies that must be repaired to avoid further crises.
“We are still in the aftermath of this dramatic crisis and a lot of anomalies observed today can be explained by remembering what happened exactly six years ago,” Mr Trichet said.
Mr Trichet gave his perspective on events leading up to and following September 2008, which he pinpointed as the start of the worst financial crisis ICC had seen in its 93-year history.
“Clearly what we had in August 2009 could have been worse than we had in 1929/1930 and advanced economies had to prove that they were able to cope with a dire situation in a changing world.”
Warning that much vigilance was still required in the wake of bankruptcy, Mr Trichet said that while global economic growth remained disappointing, risks were nevertheless on the downturn.
“Be very careful of the unexpected geopolitical risks. Prepare for the unexpected,” he cautioned.
Mr Trichet pointed to the potential financial risks associated with very low interest rates, and long-term low inflation rates, particularly in Europe.
Other potential vulnerabilities cited by Mr Trichet included investment leaving Europe for emerging economies and the unintended consequences of zero rates over six years combined with a considerable supply of liquidity in advanced economies.
“This is an abnormal situation observed in the 93 years of ICC, creating liquidity bubbles and paving the way for real problems when the time comes,” he said.
Mr Trichet concluded: “The boldness of central banks and the swift decisions taken were justified but if the structural defects of advanced economies are not fixed it will only pave the way to the next crisis. Central banks are therefore giving time to the public sector and the private sector to put their houses in order and be more conscious of risks.”