Having excluded TV cameras and newsmen, Dr Welling gave his views on “one of the deepest and most complex crises that the World has witnessed in many decades”. In its first ten years, EMU, he argued, had benefitted members by eliminating exchange rate risks but at the cost of losing monetary instruments. Although the effects were difficult to quantify, trade had probably increased by 2-3% a year more than it in the absence of EMU and financial services had growth even faster. In this period, the ECB had delivered on its promise of low inflation and economic growth. If it had a weakness, it lay in the inability to avoid asymmetric shocks and that the compensatory measures (labour market policies, price and wage policies, budgetary measures) operated inadequately. Then, triggered by the sub-prime market crisis in the USA, wave after wave of uncertainty swept over the international system… it seemed as though the system was oscillating. Then came the collapse of the Lehmann Bank, which triggered the current phase of the credit crisis.

The current crisis is a complex one and it is global, and it needs a global solution. Such a global approach is made more difficult by the existence of national institutions, national laws and national regulations. In a world of global financial markets, when problems arise, it needs 180+ different  national solutions. The original problem, he argues, lay not in the fact  that financial innovation entailed risks (all innovation and enterprise entails risks) but that those risks were not  fully transparent and were not properly priced. One  never knows before hand the distance between innovation and the checks and balances now required to  balance the system. Those balances, he assured the Seminar, were now being  grafted into place at  three levels:

• Systemic risk management ot an international level
• International functional  regulation (but with limited powers) for banks, securities and other monetary instruments
• National regulatory authorities

Following his  lecture, Dr  Welling spent another three quarters of an hour generously and expansively answering questions from the floor before leaving, presumably for yet another meeting.