Podium: The Storm Clouds Have Lifted Eddie George from a Speech by the Governor of the Bank of England to the Annual Banquet of the Bankers Club in London

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THE TRANSITION to the euro over the year end was a triumph - right across Europe, including here in the UK. That is a great tribute to Europe's central banks - including the ECB {European Central Bank}. But it is a great tribute, too, to the dedication and professionalism of the thousands of market participants who played their part in this extraordinary achievement - including those here in the City.

The members of the governing council of the ECB - individually and collectively - are committed to the view that effective price stability is a necessary condition for the sustainable growth of output and employment. So, too, are we in this country.

In this sense price stability is not simply an end in itself. Our aim, like yours in the Eurozone, is to keep aggregate demand in the economy broadly and more or less continuously in line with the underlying capacity of the economy to meet that demand. Consistently low inflation is the measure of our success in achieving that aim. There is not much that either of us can do through monetary policy directly to affect the underlying rate of growth of productive capacity. That is determined by the structural, supply-side characteristics of the economy. Demand management, including monetary policy, cannot substitute for the structural reforms that are needed to improve the flexibility with which the economy as a whole responds to change. However we can, through monetary policy, aim to create an environment of stability - avoiding either excessive or deficient demand. That is the best help that we can give. Assessing the prospective pressure of demand is extraordinarily difficult. It is especially difficult as a result of the uncertainties created by the recent turbulence in the world's financial markets. The immediate international priority was to contain the financial contagion - and there was some progress in this direction following the initial shocks in Asia. But after a series of new shocks during the summer - Russia, LTCM {long-term credit management}, the deepening recession in Japan and the worsening position in Brazil - the prospects, at around the time of the IMF meeting in Washington last autumn, were looking bleak. The atmosphere among commercial and investment bankers - particularly in the United States - was as nervous as I can remember. …