Introductory statement with Q&A

Jean-Claude Trichet, President of the ECB,
Vítor Constâncio, Vice-President of the ECB
Frankfurt am Main, 4 November 2010

Jump to the transcript of the questions and answers

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting.

Based on its regular economic and monetary analyses, the Governing Council continues to view the current key ECB interest rates as appropriate. It therefore decided to leave them unchanged. Taking into account all the new information and analyses which have become available since our meeting on 7 October 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon. Recent economic data are consistent with our assessment that the underlying momentum of the recovery remains positive. At the same time, uncertainty is prevailing. Our monetary analysis confirms that inflationary pressures over the medium term remain contained. We expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence.

Overall, the current monetary policy stance remains accommodative. The stance, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are fully consistent with our mandate and, by construction, temporary in nature. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely.

Let me now explain our assessment in greater detail, starting with the economic analysis. Recent data releases and survey evidence generally confirm our view that the positive underlying momentum of the economic recovery in the euro area remains in place. In line with previous expectations, this implies ongoing real GDP growth in the second half of this year. The global recovery is expected to proceed, and this should imply a continued positive impact on the demand for euro area exports. At the same time, private sector domestic demand should contribute to growth, supported by the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system. However, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors.

In the Governing Council’s assessment, the risks to this economic outlook are still slightly tilted to the downside, with uncertainty prevailing. On the one hand, global trade may continue to grow more rapidly than expected, thereby supporting euro area exports. On the other hand, some concerns remain relating to the re-emergence of tensions in financial markets. In addition, downside risks relate to renewed increases in oil and other commodity prices, protectionist pressures, and the possibility of a disorderly correction of global imbalances.

With regard to price developments, as anticipated, euro area annual HICP inflation rose to 1.9% in October, according to Eurostat’s flash estimate, compared with 1.8% in September. In the next few months HICP inflation rates will hover around current levels before moderating again in the course of next year. Overall, in 2011 inflation rates should remain moderate. Inflation expectations over the medium to longer term continue to be firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term.

Risks to the outlook for price developments are slightly tilted to the upside. They relate, in particular, to the evolution of energy and non-oil commodity prices. Furthermore, increases in indirect taxation and administered prices may be greater than currently expected, owing to the need for fiscal consolidation in the coming years. At the same time, risks to domestic price and cost developments are still expected to be contained.

Turning to the monetary analysis, the annual growth rate of M3 was broadly unchanged, at 1.0% in September 2010, after 1.1% in August. The annual growth rate of loans to the private sector, at 1.2%, remained unchanged from August. Looking beyond developments in individual months, broad money and loan growth remains low and continues to support the assessment that the underlying pace of monetary expansion is moderate and that inflationary pressures over the medium term are contained.

The annual growth rate of M1 has continued to moderate, standing at 5.9% in September 2010, while the annual growth rate of other short-term deposits has become less negative. This reflects the widening spread between interest rates paid on short-term time deposits and those paid on overnight deposits.

The annual growth rate of bank loans to the private sector is increasingly supported by the flow of loans to non-financial corporations. The annual growth rate of these loans is still slightly negative, but developments in recent months suggest that a turning point was reached earlier in 2010. This would be consistent with the lagged response of loan developments to economic activity over the business cycle that was also observed in past cycles. The annual growth rate of loans to households stood at 2.8% in September and thereby remained at levels seen in previous months.

Banks have continued to gradually increase the weight of credit to the private sector in the overall size of their balance sheets, but the challenge remains to expand the availability of such credit when demand picks up further. Where necessary, to address this challenge, banks should retain earnings, turn to the market to strengthen further their capital bases or take full advantage of government support measures for recapitalisation.

To sum up, the current key ECB interest rates remain appropriate. We therefore decided to leave them unchanged. Taking into account all the new information and analyses which have become available since our meeting on 7 October 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon. Recent economic data are consistent with our assessment that the underlying momentum of the recovery remains positive. At the same time, uncertainty is prevailing. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained. We expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence.

Turning to fiscal policies, there is a clear need to strengthen public confidence in the capacity of governments to return to sustainable public finances, reduce risk premia in interest rates and thus support sustainable growth over the medium term. To this end, it is essential that countries pursue credible multi-year consolidation plans and fully implement the planned consolidation measures. In their 2011 budgets, they need to specify credible fiscal adjustment measures, focusing on the expenditure side. Any positive fiscal developments that may emerge, reflecting factors such as a more favourable than expected environment, should be exploited to make faster progress with fiscal consolidation.

The urgent implementation of far-reaching structural reforms is essential to enhance the prospects for higher sustainable growth. Major reforms are particularly necessary in those countries that have experienced a loss of competitiveness in the past or that are suffering from high fiscal and external deficits. The removal of labour market rigidities and the strengthening of productivity growth would further support the adjustment process of these economies. Increasing product market competition, particularly in the services sectors, would also facilitate the restructuring of the economy and encourage innovation and the adoption of new technologies.

At their meeting on 28-29 October 2010 the EU Heads of State and Government agreed on the reform of the European Union’s economic governance. The proposals put forward by President Van Rompuy represent a strengthening of the existing framework for fiscal and macroeconomic surveillance in the European Union. However, the Governing Council considers that they do not go as far as the quantum leap in the economic governance of Monetary Union that it has been calling for.

In particular, the Governing Council is concerned that there would be insufficient automaticity in the implementation of fiscal surveillance, that there is no specification of the rule to reduce the government debt ratio, and that financial sanctions have not been explicitly retained under the macroeconomic surveillance procedure.

With regard to the macroeconomic surveillance procedure in particular, the new system of mutual surveillance would need to concentrate firmly on euro area countries experiencing sustained losses of competitiveness and large current account deficits. It should be determined by transparent and effective trigger mechanisms. It would be essential that the assessments of macroeconomic imbalances and recommendations for corrective action be given broad publicity at all stages of the surveillance process.

The public and the markets can be confident that the Governing Council remains firmly committed to delivering on its mandate of maintaining price stability over the medium term.

We are now at your disposal for questions.

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Transcript of the questions asked and the answers given by 
Jean-Claude Trichet, President of the ECB, 
and Vítor Constâncio, Vice-President of the ECB

Question: Mr Trichet, we’ve now got the last round of quantitative easing from the Federal Reserve: has that at all changed your life, your baseline scenario, or has it made the life of the ECB maybe a little bit more difficult?

Secondly, recently we had the other Jean-Claude, Jean-Claude Juncker, coming up to the present, calling for more verbal discipline from the ECB and urging the ECB to speak more with one voice. We all know, of course, that you are the “porte-parole” of the ECB, and you are the one voice, but do you sometimes think he has a point?

Trichet: As regards your first question: we have our responsibility, we have our mandate and, as you know, and as we have demonstrated since the setting-up of the euro, the Governing Council of the ECB is faithful to its mandate. We are one of the central banks in the world which gives its very precise definition of price stability and permits observers to judge us on the results of our policy. As you know, we are very satisfied that for more than 11½ years, we have delivered price stability for 330 million fellow citizens in line with the definition of price stability that was given at the very beginning of the euro. So, no further comments on what is done by other central banks, which have their own responsibility and their own environment.

On your second point, I must confess I did not see what Jean-Claude Juncker had said. I was wondering if perhaps it indirectly meant that in his own constituency from time to time verbal discipline might be appropriate. In any case, I do not comment on our own communication. As you said yourself, we have one Governing Council and one “porte-parole”.

Question: Just to go back to the US decision very briefly. Would you still say that the US favours a strong dollar after the Fed decision yesterday? It did push up the euro by 2 cents, so how would you describe that, I mean does that qualify for a brutal move almost?

And my second question is, it relates to the weekend summit and there were some press reports that came out that you were not entirely happy, that you were opposing Angela Merkel’s plan to put in place a crisis resolution mechanism that places a clear burden on bond holders to foot part of the bill for any post-2013 bailouts. So could you clarify that? Are you opposed to that and why? I mean, isn’t it fair that taxpayers should not be the only ones footing the bill?

Trichet: On your first point, I never comment, as you know, on moves on the market on a day-to-day basis or minute-by-minute basis. Second, I have no indication that would change my trust in the fact that the Federal Reserve Chairman and the Secretary of the Treasury, not to mention the President of the United States, are not playing the strategy or tactics of a weak dollar. I have no reason not to believe them, and again I trust their statement that it is in the interest of the United States to have a strong dollar, strong vis-à-vis the other major floating currencies, including the euro. And I fully share this view.

On your second point, I made remarks on the occasion of the European Council. These remarks were addressed to the presidents and the prime ministers that were in the European Council. They were not for anyone other than my interlocutors, again on this occasion the presidents and the prime ministers. I did not make public what I said on the occasion of the European Council. I consider that this is the property of the Heads of State and Government. Communication took place afterwards, and I don’t deny what has been repeated, but it was not repeated by me. It was repeated by those who were attending the meeting. At this stage I would say that the Governing Council of the ECB takes note of the prolongation of the work of President Van Rompuy, who is invited to undertake consultations on a limited Treaty change designed to create a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole. I stand ready to explain to President Van Rompuy and to the Commission – because these are the two persons or institutions that have been appointed by the European Council – the position of the Governing Council of the ECB, which is in favour of very strong conditionality. This would avoid the risk that such a permanent scheme would induce ex ante loose policies, and this is very important. In our view, all features of this new scheme should be designed both to induce the soundest policies – and in this respect, you measure the importance of all that we have said on the automaticity of the surveillance process itself, which we judge to be very important – and to help effectively to avoid systemic financial instability. As I said, I stand ready to transmit all these messages and views to Herman Van Rompuy and to the Commission, because they have been appointed to make proposals.

Question: We have heard that the ECB is looking to create disincentives for the “addicted” banks to refinance exclusively via the ECB. Can you confirm that such deliberations are taking place, and what are the options that you might be considering? Also, at this month’s meeting, did you discuss the liquidity framework going forward?

My second question relates to the repeated warnings that we have heard in recent weeks against keeping interest rates too low for too long. Are you ready to repeat that warning now and can you explain what is behind these warnings? Would the ECB consider raising interest rates before inflationary pressures actually call for such a move?

Trichet: First, it is not a normal situation to have institutions that are “addicted” and we are continually reflecting on how to deal progressively with this problem, because we are not in a normal situation. So yes, we are constantly reflecting on what could be done, but I have no decision to announce to you right now. As regards our own framework and the possible decisions that we will take, bearing in mind what we have always said, which I repeated today on behalf of the Governing Council, the non-standard measures that we have taken are, by definition, of a transitory nature. We will give you a rendezvous at our next meeting. We will have to make up our minds for the next month and decide what to do. The rendezvous is scheduled for December.

As regards your second question on interest rates, I can only say once again that you know the extent to which we are never pre-committed. Our doctrine is that we take decisions that are appropriate, taking into account that we have to deliver price stability over the medium term. I also said, and that it is very important, that there is no correlation between non-standard measures on the one hand and our own interest rates on the other. We can move interest rates without necessarily having totally ended the non-standard measures. We have always made that point and I will continue to do so. That said, taking everything into account, as we always do, we consider the present interest rates to be appropriate.

Question: First, during your meetings last night and this morning, did you or any member of the Governing Council express any worries about the impact on inflation outside of the United States of the quantitative easing announced last night by the Federal Reserve System?

Second, with regard to euro area governance, in the initial proposals you made at the start of this process, you talked about a crisis resolution mechanism and you very deliberately left out any suggestion that this mechanism could oversee a debt restructuring. Can you explain why the ECB opposes the idea of such a mechanism having a debt rescheduling facility?

Trichet: In response to your first question, when we decide on our own policy, we consider all of the parameters that are important. It is clear that all of the information we have on developments in the US economy, the first economy among the advanced economies of the world, as well as all the information we have on the overall economic, financial and monetary situation, is important. I would not say that we have drawn any pre-conclusions about the influence of the decisions taken by the US central bank. I will just say that it seems to me that the majority of observers had the decision very much in their minds.

On your second point, we will clarify our message to Herman Van Rompuy and to the Commission. They have the task of putting both; the Treaty changes itself, and the precise mechanism into a precise form. To my knowledge, this is not yet the case: nobody has delivered a precise mechanism or a precise framework. Comparing with what we are reflecting on in Europe, take, for instance, the International Monetary Fund (IMF), which is, after all, the global mechanism that exists to help countries and economies in difficulty to recover and adjust with very strong conditionality. The IMF does not make necessarily the ex-ante working assumption that the relationship with markets, investors and savers is interrupted. It can be, but it is not the ex-ante compulsory assumption. Let us look back over the past 20 or 30 years, and estimate the proportion of cases in which this kind of intervention by the IMF occurred alongside the interruption of the normal functioning of the financing of the economy through hair-cuts and generalized restructuring. Depending on the period under consideration, the proportion might be the following: in more than 75% of cases there was no such interruption of the normal relationship and only in less than 25% of cases there was. Of course, it can never be excluded, but this assumption is not made as compulsory ex ante. I would say the assumption made is the contrary. I am speaking about the IMF. So, we will reflect on all of that, and I have a great deal of confidence in President Van Rompuy and in the Commission to take into account absolutely all of the elements that are necessary to make a precise proposal, which – again – has so far not yet been made.

Question: Mr Trichet, what will the survey of professional forecasters show when you publish it next week? And, considering all the upbeat data that we have seen in recent weeks, do you expect ECB staff to publish upgraded forecasts next month?

Trichet: I will let you know when both the survey of professional forecasters and our new staff projections are published. You will have heard me say that we were confident as regards the solid anchoring of our inflationary expectations, which the Governing Council has always considered to be our major asset. In that we have delivered price stability and are credible in the delivery of price stability. This is our mandate. It is our primary mandate. I remember saying that last time when you were asking me questions on countries X, Y and Z. Our own responsibility is to deliver price stability to 330 million people, and we have done that. We are credible in doing that, and it helps us in all circumstances. It prevents both inflationary and deflationary risks from materialising. We have always been protected from such events, and I think this is very much due to the solid anchoring of our expectations at below, but close to, 2%.

Question: Two questions relating to the situation in Ireland. The first is whether you are in any way alarmed at the quite significant rise in Irish borrowing costs this week. The yield on ten-year money was approaching 7.8% this morning shortly before noon. Are you in any way alarmed, or, in your view, is that a fair reflection of the level of risk in the Irish economy?

Secondly, the government in Dublin is preparing a four-year austerity programme. It has declared that the adjustment will be in the order of €15 billion over the course of the four years. Is that figure going in the right direction? Are you encouraged by it, are you encouraged by the debate that is taking place in Ireland or is there more that you would like to see, and why?

Trichet: It is now 3 p.m. If I understand correctly, the Irish government will announce the details of the four-year programme this afternoon. I would only say at this stage that, in our view, the €15 billion figure you mention is currently sufficient. But, of course, you have to be permanently alert and ready to do whatever is needed. The ultimate goal, which, to my knowledge, has also been made public, is the 3% at the end of the period. I think that the market, as well as observers, savers and investors, will be looking at what the minister and the government say in a few hours’ time with great interest. My interpretation is that this government message, which will focus on the frontloading of the programme, is of extreme importance. At present, I have no reason to think that observers will be disappointed but, of course, I cannot say anything else. It is up to the minister to deliver the message.

Question: Mr Trichet, Mr Bini Smaghi, from the ECB, has recently elaborated on the EU governments’ proposal for a permanent mechanism, and, in his remarks posted on the ECB’s website, he says that the possibility of introducing the idea of debt restructuring opens the door to the idea of orderly debt restructuring, so more than case by case. Do you think that this is the real intention behind the EU Council proposal, especially by Germany and France?

And my second question do you share the concern of those governments that their taxpayers do not foot the bill again in the event of a new sovereign debt crisis?

Trichet: I have already responded to the second point.

On the first point, I never comment on what my colleagues are saying.

Question: Just to ask again what my colleague did about Irish bond yields. The spreads to German Bunds are now at the level that Greece was, when they had to be rescued. Does that concern you? Do you think Ireland now needs to be rescued?

And a second question on the bond programme: it has now been three weeks in which you have not bought any securities. Does that mean it is over?

Trichet: On your second question, I have already said that it is not over.

On your first question, we will all listen to what the government of Ireland announces, which will be of extreme importance. It is my expectation that something very important will be said this afternoon in a few hours from now.

Question: Two questions, Mr President. On the one hand, again I have to come back to the Ireland situation. Does this show that the mechanism of buying bonds in order to lower the spreads of the yield levels is not working? And what are the options that you have on the table? Are you discussing upgrading it significantly or scrapping it altogether?

And, second, a question with regards to money market rates: the three-month EURIBOR is actually now above the ECB benchmark rate of 1%. Aren’t you, on the other hand, discouraging interbank lending if you continue to offer banks three-month loans at 1%?

Trichet: On your first question, I would only remind you what we did with the Securities Markets Programme. We launched this programme in May in order to help restore a more normal functioning of our monetary policy transmission mechanism. And, as you know pretty well, we never targeted any particular spreads or whatever on the market. And that is absolutely obvious, because you know month after month and week after week what we are doing and you can see what happens. So, no other comment on that.

On your second point, we consider that the unlimited supply of liquidity is there. As I also explained last time, the banks are asking for all they need, because there is no limit, either on the main refinancing operations, or for the one-month window, or for the three-month window. So, because we did not change our rates (neither the MRO nor the deposit rate was changed), what we have observed in the market is that the positioning of EONIA, the very short-term rates, is dependent on the decisions of the banks themselves. It is a kind of equilibrium which depends on what the banks themselves are asking for, and you can see that it goes up and down from time to time, very much depending on the demand from the banks themselves. So, there is no particular signal there. The only important observation I would make is that it shows that we are in a normalising process, and that is an important element. But again, from our part, there was no signal at all – no monetary policy signal. This normalising has been taking place under our eyes, and we will see what happens later on. That is the observation I would make, and I have to say that, for me, a normalising is something positive. It also indicates that perhaps the EONIA means more today than it meant before, because before perhaps only a very small fraction of the institutions had access to this very low interest rate refinancing.

Question: Is this new spread divergence of Greek, Irish and Portuguese bonds a consequence of the Franco-German plan for an orderly sovereign debt restructuring, which was previously seen as politically impossible? Or is it related more to specific problems of the countries?

Trichet: I will certainly not embark on disentangling the various factors that might have played a role. You might have seen what the market literature was saying. You have a lot of different views, as always, on the market. I would only say that what we have in front of us now is, to my knowledge, not a two-country proposal but a European Council call to Mr Van Rompuy and to the European Commission. And you know the text, because it has been made public. That is where we are in terms of developments.

Question: Mr Trichet, you said that risks to the inflation outlook are tilted slightly to the upside. How severe do you think these risks are?

Trichet: I would say, in that respect, no more and no less than in the last meeting. We did not change our judgement on that front. We see, obviously, this slight tilting up, but there is no change in our overall judgement today in comparison with a month ago.

Question: We see now in the media increasing speculation about who will be sitting in your position next year. Do you feel that as the time draws nearer, this is undermining your authority in any way?

Trichet: I do not think so. Frankly speaking, I have a mandate of precisely eight years and the mandate of eight years is there to give you authority until the last moment, the last day. In any case, I have the immense honour to preside over the Governing Council and Vítor has the immense honour to vice-preside over the Governing Council. The Governing Council is the authority which takes the decisions and I have a profound trust in collegial wisdom.

Question: One question again on the recent rise of the euro, not about today’s rise, but about the rise during the last weeks and months. Could it dampen the economic recovery in the euro zone and what will it mean for your inflation expectations?

Trichet: I have always said that we have no other appreciation when we examine the monetary policy than to make a synthesis out of all the information that is available and, of course, exchange rates are part of that available information. But in addition to the moves in the exchange rate, a very large number of other factors equally play a role. I do not want to try to disentangle what would be precisely due to the exchange rate. In any case, I have already said what I have to say on the euro/dollar relationship.

Question: Are the high spreads for southern European bonds, which are for some countries higher than in May, a risk for the transmission of the Eurosystem’s monetary policy, and if not, why were they in May?

Trichet: I already said that we had in place our Securities Markets Programme. We have our observation of the functioning of the markets and we do what we judge appropriate according to what we are observing. Let me just say the following: what counts is the soundness of the policies pursued by governments. We have always had this position. We defended the Stability and Growth Pact when it was criticised heavily. We opposed and expressed our grave concerns publicly in 2005 when the Stability and Growth Pact was revised. Unfortunately, we see now that everybody agrees with these grave concerns that we had expressed. We had called permanently for a rigorous implementation of the Pact and we have been calling permanently, including in the most recent weeks and months, for changing policies. And, I have to say that in a number of cases governments have redressed their policies and their fiscal policy in particular. There is also the introduction of a new surveillance mechanism. From that standpoint, let me only mention, for the record, that we were the first to call for this new surveillance mechanism on relative competitiveness and on imbalances more than five years ago. We should follow that very carefully in the Eurogroup. Now we have an agreement to introduce this surveillance mechanism and I have to say that this is something which is important, even if – as I said – we consider that it is not sufficiently strong. But it goes in the right direction; it did not exist before.

Question: It has been said by some observers that having automatic mechanisms that link financial support to debt restructuring is something which will attract speculative pressure and possibly even precipitate crisis. What is your view on this? Do you agree with this view?

Trichet: I have already said everything that I have to say on this particular point. Again, what will be designed has, in our view, to be designed to reinforce financial stability and, of course, not to go against financial stability in the euro area as a whole.

Question: Despite the signs that the recovery is continuing in the second half of the year, there still seem to be very wide divergences when you look at unemployment rates or when you look at business surveys. Is this persistent, maybe even widening, gap something which worries you when it comes to the implementation of monetary policy?

And secondly, you mentioned a little while ago trusting collegial wisdom. I think you were talking about the ECB. Could you expand a little bit on the importance of collegiality?

Trichet: On your second question first, you know that the Treaty is there. All decisions that are taken on monetary policy are taken by the Governing Council and namely by all colleagues on the basis of “one person, one vote”. This is something which is remarkable, I have to say, and it is what the Treaty is calling for. As regards the Executive Board, we are six and we take our decisions as a college of six. Of course, this does not mean that there is not an important role for the President or the Vice-President. But again, it is a college and I think that is the case in all the important central banks I know. In all the important central banks I know, the decisions are taken by a college, because you need to have a full understanding of the multi-dimensionality of the situation. Pros and cons have to be weighed and you also need different angles of vision and experience, which I trust we have in the Governing Council of the ECB, as well as in the Executive Board. And I would say it is the same in the Federal Open Market Committee in Washington or in the Monetary Policy Committee in London. So we have there a feature of independent central banks that is, I trust, fundamental.

On your first question, let me only say that while we have some countries that are in a situation where they have to adjust because they have experienced very fast growth and in some cases bubbles over the last years, I am satisfied that some other countries are growing rapidly. When I look at those countries that are now adjusting, and particularly those that were in serious difficulty, I am happy that at the same time Germany for instance is growing at a relatively rapid pace, much more rapid than in the past. This is of course positive. When you are at the level of an entire continent with 330 million people, with a very large and diverse set of economies, it is normal that you have a degree of heterogeneity. So when we compare with the United States, we see the same kind of differences between the various states. Of course, this does not mean at all that we are satisfied with the surveillance which has been exerted inside the euro area over the last years. We call for a quantum leap and that would certainly diminish some of the heterogeneity that you just mentioned.

Question: I was just trying to get a better idea about the bond purchasing programme. You’d said earlier that it’s not over; you also said that you are not targeting any specific facts with the programme. So, if rates continue to creep up, why is the ECB standing on the sidelines for the past three weeks? I am just trying to understand this, is there a specific effect you are targeting, possibly trying to encourage the governments there to take stronger measures to consolidate the budget?

And then secondly, as far as the Fed and the Bank of Japan are concerned, I believe they are meeting on Friday, it looks like they will be providing enough cover for the ECB to potentially take more action to provide economic support for the euro area? Do you think that there is any need to do so? In other words, would their quantitative easing programmes give the ECB political coverage to take or to undertake more action here in the euro area to reduce risks to the economic outlook?

Trichet: I already said that we all had our responsibilities, we were, I trust, all faithful to our mandate and to our responsibilities. I have nothing else to say on your second question.

On the first question, again, all our non-standard measures are transitory in nature. I say this in each meeting we have. They are transitory by nature — first. Second, I also said that the Securities Markets Programme was in place. Third, beware of not realising the fact that we provide information every week and the information comes after the transactions have been settled. So you have always information that is not real-time information. It addresses what happened a number of working days before. So, I would say that you will see in the future that the programme exists.

Question: Why not undertake additional measures when the rates were creeping up?

Trichet: Again, nothing else to add.

Question: You said earlier that you are confident the United States is not pursuing a policy of a weak dollar. Do you have the same trust in other authorities, or do you see any risk of competitive devaluations elsewhere in the world and also increasing capital controls?

And the second question pertains to the Introductory Statement, last month you still said that you expected domestic demand to strengthen further, you dropped that this month, is that a message or just a change of language?

Trichet: As regards your second question – it is just a change of language; in any case our new projections will be given at the next meeting at the beginning of December.

On your first question on exchange rates, I already mentioned very clearly what our position was as regards the major floating currencies. Now you ask a question on a larger number of currencies, which are not the major floating currencies, and there you know our own message, which is very clear. Orientations have been taken, particularly in the Toronto Summit, so that the currencies concerned would progressively make their exchange rates more flexible. We consider that this is going in the right direction, that it is certainly in the interest of those currencies that are not, as we speak, sufficiently flexible. It is also in the interest of the entire international community. So, that message is also clear and I would say that it is a message which comes from the international community itself, not only from us.

Question: A follow-up on euro zone governance. In the Introductory Statement, and in your remarks, you have expressed a number of concerns on behalf of the Governing Council about the proposals on the table at the moment. I just wondered what the consequences are that you fear if your recommendations and your call for a ‘quantum leap’ is not honoured by the politicians; you referred to the fact that you expressed grave concern back in 2005 when the Stability and Growth Pact was revised and we saw the consequences of that fear. So, is your fear that we might see another crisis down the road if your recommendations are not followed?

Trichet: No, it is certainly not the right interpretation. We are in a position where we feel, perhaps more intensively, the importance of having the economic union functioning as well as possible. We are responsible for the monetary union. We are already, if I may say, a monetary federation. And, of course, it puts us in a situation where we see things very clearly. We feel the importance, of the good functioning, the appropriate functioning of the economic union itself, with great intensity. And we consider; the Governing Council considers it as its duty and as very important to ship our messages to the Council, to the Eurogroup, to the 27 as well as to the 16, particularly the 16 in the euro area. I said that what has been approved, namely the Van Rompuy report, was going in the right direction. It’s undoubtedly progress, we do not deny that. But to take into account the fact that we are in a monetary federation, we have to go much further in the direction of more automaticity. It is our duty to make those points so. I am not saying today that I would pre-announce major difficulties if they don’t do everything, all that we are calling for. But in any case, we are still in a moment of time where there are discussions; you have the Council, you have the Parliament and you have the Commission. And the procedure in Europe is a procedure which calls for appropriate discussion inside the Parliament, between the Parliament and the Council. So again, it is our duty to say candidly, serenely, but also firmly what we see and what we trust.

Question: Regarding the concerns of the Governing Council on Mr Van Rompuy’s proposals, is the Governing Council unanimous on this position?

Trichet: Before answering your question I believe that at the last press conference you asked me a question on the pension reforms and I would just like to confirm what I said last time, namely that we approve the pension reform in France. We consider it to be a very important structural reform. It was absolutely necessary and we approve this structural reform, just as we have approved other bold structural reforms embarked upon by a number of governments in difficult circumstances.

Now as regards your question I would say that the Governing Council on the introductory statement, we were unanimous.

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