Introductory statement to the press conference (with Q&A)

Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Frankfurt am Main, 6 December 2012

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 of the Governing Council, which was also attended by the Commission Vice-President, Mr Rehn.

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. Owing to high energy prices and increases in indirect taxes in some euro area countries, HICP inflation rates have been elevated for some time. More recently they have declined, as anticipated, and are expected to fall below 2% in 2013. Over the policy-relevant horizon, inflation rates should remain in line with price stability. The underlying pace of monetary expansion continues to be subdued. Inflation expectations for the euro area remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. The economic weakness in the euro area is expected to extend into next year. In particular, necessary balance sheet adjustments in financial and non-financial sectors and persistent uncertainty will continue to weigh on economic activity. Later in 2013 economic activity should gradually recover, as global demand strengthens and our accommodative monetary policy stance and significantly improved financial market confidence work their way through to the economy. In order to sustain confidence, it is essential for governments to reduce further both fiscal and structural imbalances and to proceed with financial sector restructuring.

Today, we have also decided to continue conducting our main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the sixth maintenance period of 2013 on 9 July 2013. This procedure will also remain in use for the Eurosystem’s special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the second quarter of 2013. The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time. The rates in the three-month longer-term refinancing operations, to be allotted until June 2013, will be fixed at the average rate of the MROs over the life of the respective longer-term refinancing operation.

Let me now explain our assessment in greater detail, starting with the economic analysis. Following a contraction of 0.2%, quarter on quarter, in the second quarter of 2012, euro area real GDP declined by 0.1% in the third quarter. Available statistics and survey indicators continue to signal further weakness in activity in the last quarter of the year, although more recently some indicators have stabilised at low levels and financial market confidence has improved further. Over the shorter term, weak activity is expected to extend into next year, reflecting the adverse impact on domestic expenditure of weak consumer and investor sentiment and subdued foreign demand. A gradual recovery should start later in 2013 as our accommodative monetary policy stance and significant improvement in financial market confidence work their way through to private domestic expenditure, and a strengthening of foreign demand should support export growth.

This assessment is reflected in the December 2012 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP growth in a range between -0.6% and -0.4% for 2012, between -0.9% and 0.3% for 2013 and between 0.2% and 2.2% for 2014. Compared with the September 2012 ECB staff macroeconomic projections, the ranges for 2012 and 2013 have been revised downwards.

The Governing Council continues to see downside risks to the economic outlook for the euro area. These are mainly related to uncertainties about the resolution of sovereign debt and governance issues in the euro area, geopolitical issues and fiscal policy decisions in the United States possibly dampening sentiment for longer than currently assumed and delaying further the recovery of private investment, employment and consumption.

According to Eurostat’s flash estimate, euro area annual HICP inflation fell to 2.2% in November 2012, down from 2.5% in October and from 2.6% in the two previous months. On the basis of current futures prices for oil, inflation rates are expected to decline further to below 2% next year. Over the policy-relevant horizon, in an environment of weak economic activity in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain moderate.

This assessment is also reflected in the December 2012 Eurosystem staff macroeconomic projections for the euro area, which foresee annual HICP inflation of 2.5% for 2012, between 1.1% and 2.1% for 2013 and between 0.6% and 2.2% for 2014. Compared with the September 2012 ECB staff macroeconomic projections, the projection range for 2013 has been revised downwards.

In the Governing Council’s assessment, risks to the outlook for price developments are seen as broadly balanced, with downside risks stemming from weaker economic activity and upside risks relating to higher administered prices and indirect taxes, as well as higher oil prices.

Turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued, taking into account developments over several months. Most recently, the annual growth rate of M3 increased to 3.9% in October, from 2.6% in September, while M1 growth accelerated to 6.4% from 5.0% over the same period. These developments are partly due to a specific transaction leading to an increase in overnight deposits belonging to the non-monetary financial sector. At the same time, deposits from households and non-financial corporations also rose in October. Overall, more observations are needed to distinguish between shorter-term volatility and more lasting factors.

Unlike in the case of monetary developments, there has been little change in credit growth. The annual growth rate of loans to the private sector (adjusted for loan sales and securitisation) remained at -0.4% in October, unchanged from September. But this development reflects further net redemptions in loans to non-financial corporations, which led to an annual rate of decline in these loans of -1.5%, down from ‑1.2% in September. The annual growth in MFI lending to households remained unchanged at 0.8% in October. To a large extent, subdued loan dynamics reflect the weak outlook for GDP, heightened risk aversion and the ongoing adjustment in the balance sheets of households and enterprises, all of which weigh on credit demand. Furthermore, in a number of euro area countries, capital constraints, risk perception and the segmentation of financial markets restrict credit supply.

In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue strengthening the resilience of banks where needed. The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels. Decisive steps for establishing an integrated financial framework will help to accomplish this objective. A single supervisory mechanism (SSM) is one of the main building blocks. It is a crucial move towards re-integrating the banking system.

To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.

Further economic policy measures and progress in the reform of European governance should help to support financial market sentiment and improve the outlook for economic growth. In this context, the Governing Council looks forward to the roadmap towards genuine Economic and Monetary Union to be decided at the European Council meeting on 13-14 December 2012. Initiatives to accelerate structural reforms that help restore competitiveness are particularly important to revive the growth potential of euro area countries and to increase employment. More generally, all euro area countries must ensure that their product and labour markets possess the adjustment capacity required for their smooth and effective functioning within a monetary union. Finally, continued fiscal consolidation is expected to restore sound fiscal positions, in line with the commitments under the Stability and Growth Pact and the 2012 European Semester recommendations. Significant progress has already been made in reducing domestic and external imbalances and in improving competitiveness. Continued policy actions on the European, structural and fiscal reform fronts should be mutually reinforcing and send a strong signal to markets.

We are now at your disposal for questions.

* * *

Question: Mr President, is Italy falling into an abyss? This is the question that markets are asking. And which signal, do you think, is necessary given the fact that the spread between Italian Treasury bonds (BTP) and Bunds has gone up to 330 basis points again. Which signal is necessary for the markets to ensure that Italy is going forward?

Draghi: I am sorry, but I will not comment on the specific Italian situation.

Question: In the context of what you have just said about looking forward to what is coming out of the Council meeting next week and the roadmap, in the first draft of the conclusions for that summit, it is said more or less only that that will be taken up again after 2014, when we have a new Parliament and a new Commission.

Draghi: I am sorry, what would be taken on…?

Question: The roadmap for full Economic and Monetary Union. It is only mentioned very, very shortly in the first draft. Will it be a disappointment for you if the Council does not agree on a full roadmap with dates?

Draghi: Well, I expect this is going to be an important European Council meeting. It is an important European Council meeting because it will basically say that the commitments, the engagements and the promises that were made at the June Summit have either been maintained or are going to be maintained in the years to come. I do not actually have such poor expectations as those you are hinting at. I am confident that the commitments of the June Summit will be confirmed in the forthcoming Summit.

Question: Mr Draghi, you have warned repeatedly, or you have said repeatedly, that significantly higher credit costs for companies in the periphery are not justified. And I am wondering whether there might be anything you could do to address this problem more directly, especially in the event that there should never be an activation of outright market transactions (OMTs).

And my second question is: Did you discuss interest rate cuts today and, in that respect, what – in your view ­ are the greatest downside risks associated with a negative deposit rate in the euro area?

Draghi: You’ve actually asked three questions. Well, actually I have not said that higher credit costs are unjustified. I said that, in a sense, it is quite natural that you have different credit costs in different parts of the Monetary Union, costs reflecting the different degrees of risk. But there is a degree, a range, beyond which I said that there are risks, such as redenomination risks, that make these differences unacceptable. So your question was: What have we done about that? I think since the Governing Council decided on the OMTs in early August, we have seen a very significant improvement in financing conditions and a narrowing of such differences between interest rates and lending costs in different parts of the euro area. So, from this point of view, through that announcement, the Governing Council acted promptly to address the situation.

Did we discuss interest rate cuts? That was your second question. There was a wide discussion but, in the end, the prevailing consensus was to leave the rates unchanged.

On the issue of negative interest rates on the deposit facility, there is nothing new to report. As Mr Praet recently has said we are operationally ready, but the discussions in this respect did not go into any depth. We briefly touched upon the complexities that such measure would involve and on possible unintended consequences. But we did not elaborate on this any further.

Question: Mr Draghi, are you concerned about the recent disagreement about the supervisory mechanism for banks and the implications it could have for this plan, a possible delay maybe?

My second question would be: did you discuss today the possibility of national central banks rolling over the Greek debt that they hold in their investment portfolios?

Draghi: I think we have to look at these discussions on the Single Supervisory Mechanism (SSM) in perspective. If you consider that before the summer we did not even have an idea of what this could look like. The Commission did very good work in producing a draft regulation, which really deserves a lot of credit. But the political discussion has really just started. I look at this in perspective and I am very confident that we will reach an agreement. There is a general will to reach an agreement. The benefits of having one single supervisor for the euro area are not disputed. Its main aim is to break the link between the sovereigns and the banks. It’s to make banks basically reliable and trustworthy, regardless of where they have their headquarters and where they exercise their business. So that is why it is so important and the benefits aren’t disputed. I think it is just a normal part of the discussions, but I am quite confident that we will soon have an agreement.

On the NCBs, we did not really have a deep discussion about that issue, but we certainly discussed it and we basically have not reached a conclusion yet.

Question: A last question from Financial Times Deutschland also on the banking union, would you actually say that in parallel to establishing the SSM under Article 127.6, there should be a change to the Treaty providing a more solid basis for distinguishing between the monetary policy and the supervision functions?

Draghi: I think we have to understand – all of us – that the ECB is not a legislator. It is a passive subject to some extent. So it is not up to us to decide on the best legal route to proceed. The Legal Counsel of the European Council, and all the other thousands of lawyers that have been asked to pronounce on this issue, considered Article 127.6 an adequate basis for building a single supervisory mechanism in the euro area. I am, frankly, not in a good position to dispute this conclusion. However – if it is the ECB which is going to carry out these tasks – it is absolutely essential for the ECB to have a legal basis in place to carry out the next step of the work, which is basically to build this mechanism. We are looking forward to having that in place, because our preparations will otherwise slow down.

Question: Your economic outlook for next year, compared with this year’s, is quite weak. Are there any tools outside of interest rates that the ECB could deploy if conditions were to erode further, and what types of things could trigger more aggressive ECB action to safeguard the economy?

My second question is on Greece. This debt buy-back was launched, and the private sector has been asked, for a second time, to take a haircut on their Greek bonds. The ECB has ruled itself out for that; the IMF has ruled itself out for that; the governments do not want to do it. Are the euro area institutions going to the private sector too much on Greece, especially given that Greek bondholders purchased these bonds thinking that the statistics were right coming out of Greece, thinking that the governance of the euro area was going to prevent the kind of crisis that we have seen?

Draghi: As you rightly said, the economic outlook is weak. At the same time, we have not seen any substantive change in our medium-term assessment of price stability. Also, we consider that the monetary conditions remain accommodative. Especially since our OMT announcement, the improvement in financial markets has been significant, both in the bond markets but also in the stock markets. So, you see, I would say the stock markets have performed fairly well in light of a weak economic outlook. So, I think one should keep all these elements in mind. Also, if you look at some expectations data, you see that recently in Germany, the Ifo business climate index increased in November, after six consecutive months of decline. In France, the INSEE industrial business confidence index also increased in November. However, both of them remained below their long-term averages, of course. Also in Italy, the ISTAT index concerning business confidence in the manufacturing sector improved in November, by more than expected. So, in a sense you have conflicting indicators. Some of them point downwards, others point upwards, and, of course, we will continue monitoring the situation and taking our decisions.

On Greece, were you saying that too much is being asked of the private sector? My impression is actually the opposite. A lot is being asked of the public sector, and I would say that most of this whole programme is being financed and driven forward by the public sector, with public sector money. So, the debt buyback is part of this and it is too early to say how it is going. But, basically, I would say that it is mainly the public sector that is providing new money. Also, what is most important in this latest agreement is the medium-term commitment to possibly providing new money if Greece were to have a primary surplus, but for some reason things were not going well, and not because of a lack of compliance with the programme. So, this is quite important.

Question: Mr President, I have two questions about your membership of the Group of Thirty (G30). First, taking your closeness to the private banks, and given pending conflicts of interest and ethical issues, how do you explain your on-going G30 membership?

And my second question: of the 30 members, five members are former or present bankers of Goldman Sachs. This Group is co-funded by Goldman Sachs. You are a former fellow of Goldman Sachs. How do you intend to avoid conflicts of interest?

Draghi: Actually, I do not intend to avoid them, as I do not think that there are any conflicts of interest. But let me read this to you. Given the objectives and purpose of the organisation, the ECB does not consider that the ECB President’s membership of the Group of Thirty entails a conflict of interest.

You might have seen that I am not the only central banker who is a member of the Group of Thirty. Just to name a few: my predecessor Jean-Claude Trichet, and Mervyn King, who were not Goldman Sachs bankers; Governor Zhou of China, who was not a Goldman Sachs member; Masaaki Shirakawa, who was not a Goldman Sachs member; and Mark Carney, who was a Goldman Sachs member.

I have no idea whether the Group of Thirty is being financed by Goldman Sachs. Actually it is new to me. But, the European Ombudsman was approached by the person claiming that it is a conflict of interest. The ECB has replied to the questions of the European Ombudsman by the given deadline and the answer is publicly available. The final assessment of the European Ombudsman is still pending.

Question: Two questions: one on the money being passed through, or not being passed through, from the banking sector to the real economy. Are you more satisfied now with how money ends up in the so-called real economy? Have you got any evidence of how, for example, the LTROs not only helped refinance the banking industry but also ended up somewhere in industry, etc.?

The second one: in terms of what we have seen in the latest movements in M3, specifically in M1, you said it is a bit early to say whether this is just a month-on-month uptick; have you got any further evidence or any further clues as to whether, especially when you see an uptick in M1, this is actually a precursor to an uptick in consumer demand that then might filter through the economy?

Draghi: With respect to the first question, our LTROs and our refinancing facilities have indeed injected a very significant amount of liquidity, but, to a large extent, this liquidity has not actually reached the real economy. They, especially the LTROs, basically avoided major disasters, which were looming, ahead of the funding crunch that characterised the first quarter of this year. As I have told you many times, there were bank bonds worth about €230/€260 billion falling due, to which you have to add something like €300 plus billion worth of sovereign bonds falling due, all in the first quarter. To some extent, the credit crunch that started last year, because of the fear of the funding crunch that would take place in the first quarter of this year, was halted by this action; that action addressed the funding needs. Banks may not lend to the economy because of funding problems – and they have been addressed, because of capital shortages and, to some extent, they too have been addressed by the banks themselves because a significant amount of capital has been raised in the last two years. There is also a risk perception issue, the risk perception that comes from the deteriorating quality of your counterparty that cannot be addressed by the funding facilities. There is also a sort of problem now that credit growth is subdued, mostly because of the demand factor. In this context, we are continuing to really think about this; we know we have to overcome, first and foremost, the fragmentation of the financial and credit markets in the euro area. But, as I said at the beginning, the currently accommodative monetary policy stance will find its way through the economy. We view that, by the second part of next year, we should see the beginning of a recovery.

The uptick in monetary aggregate (M 1) was mainly caused by one thing, the ESM paid their tranche and that increased the monetary aggregate by something like €30 billion, if I am not mistaken. That is what is registered by this data.

Question: My question comes back to the single supervisory mechanism. At the core of the disagreement on why there has not been an agreement is the point that Germany fears that this mechanism should not cover all euro area banks, but just the big ones. What exactly can you tell them, or what kind of compromise agreement do you see possible to move the debate further forward?

Draghi: One should aim to have this mechanism covering all euro area banks from a legal, jurisdictional viewpoint, because you want to avoid fragmentation in the banking market, you want to keep a level playing field, and you want to avoid stigma for some categories of banks. However, in practice, I do not think that there is going to be much difference between this position and that which has been advocated by others. It is quite obvious that the ECB supervisor will not be able to supervise 6,000 banks, and that, as the size of the bank and as its systemic significance decreases, so the intensity of the supervision that is carried out at the central level will decrease and the intensity of the supervision that is carried out at the national level will increase.

Question: The Greek economy is still shrinking despite all the public money that, as you have just said, has been lent to it. How much time do you need to recognise that the “killer medicine” that you gave to the Greek people is not working?

Draghi: First, I would not agree with the “killer medicine”, especially given the fact that the ECB is Greece’s largest creditor. Just keep in mind what the ECB and the Governing Council have done. Second, I acknowledge the significant progress that Greek governments, and especially the last one, have made. I acknowledge a very significant progress in terms of fiscal consolidation and structural reforms. That is very important. Part of what is happening is a necessary adjustment, because let us not forget that the imbalances that initially needed to be addressed by Greek economic policy were really very important.

Question: My first question is on Spain: Vice-President Constâncio recently said that the ECB expects Spain to apply for aid soon in order to activate the OMTs. When do you expect Spain to apply? And what if it remains hesitant to do so?

My second question is on Italy, however not from a political but a monetary policy point of view: Is the ECB ready to activate the OMTs for Italy too, if necessary?

Draghi: First, let me tell you what Mr Constâncio meant. We have all always said that we would not tell governments what to do when it comes to the OMT. So it is up to the governments to decide what to do. They know what the conditions are. They know they will have to have in place either a full EFSF/ESM macroeconomic adjustment programme or a precautionary programme. This is a necessary, but not a sufficient condition. The ECB will then carry out its independent assessment, which applies not only to Spain but also to any other country.

Question: To Italy as well?

Draghi: Yes, and to all countries. That is what we said in our statement and what we have always said. It is a combination of conditionality and support, but the support is not granted automatically.

Question: Unemployment has reached a record high in the euro area. What is your response to obviously the army of unemployed and youth unemployed now in the euro area? Is this a price worth paying for the structural adjustment that you think is necessary to make the euro work?

Draghi: It is hard to say whether it is a price worth paying. This question should rather be addressed to the policy-makers that created this situation to begin with. Let us not forget that we are in this situation, which I term “a bad equilibrium”, because of the poor policy-making, or the lack of policy–making, in the years before the crisis. The crisis has simply highlighted these disequilibria that already existed. It has highlighted that our banks were not properly capitalised. It has highlighted that the budgetary and debt positions of our governments were not sustainable and, finally, it has highlighted that our euro area governance ought to be vastly improved. So what is happening now is the direct outcome of the policy decisions that have been implemented in order to respond to these disequilibria that were unsustainable. I agree that it is a very hard price to pay, but it is unavoidable. And, I have always said that the only way to mitigate the impact of this budgetary consolidation, which is contractionary in the short term, is to undertake structural reforms that could increase competitiveness and exports, as well as create jobs and growth.

Question: These are some fairly dramatic downward revisions in your own staff’s growth projections for 2013. Can you just explain again why you are apparently going with the more optimistic readings from the business surveys in terms of not going for another rate cut and ignoring your own staff’s projections to some extent?

And a second question on the banking union. As a passive subject, as you said, what is the minimum that you would set as a standard that is required for this to make sense? If there is a political decision that this is not going to affect all 6,000 banks, would you as the ECB turn around and say that this is pointless, that there is no point in doing this?

Draghi: In a sense, I responded to the first question when I said that the outlook for medium-term price stability has not changed substantially. I have also highlighted some positive elements of the present situation, particularly the improvement in financial markets – the stock markets and the bond markets. And I have also highlighted the already very accommodative monetary policy stance. Note that some countries’ spreads or sovereign bond yields have declined by 200 to 250 basis points since July. This is much more than anything you could achieve by reducing the short-term policy rate. We will of course continue looking at the situation, but we have already done a lot of necessary things.

Question: Have you have done enough?

Draghi: I am not going to answer this question as you can imagine. Basically, what I said gives you, I think, a picture of what the Governing Council was looking at today.

On your second point, I think that at my very first press conference on the banking union I said that the single supervisor – especially if the ECB is going to be tasked with this – should basically be a strong supervisor. The ECB should not have the reputational risk that often comes with supervision. This has got to be a serious thing. This should create – or help to create – a level playing field. Especially from the ECB’s viewpoint, what we really care about is that we are placed in a situation where our primary task – monetary policy geared to deliver price stability in the medium term – is not mixed with other considerations. For example, we are very much in favour of the separation of monetary policy and supervision, and I would say that deep thinking about how to separate the two within the ECB is going on now.

Question: Sorry, I think you make it a little bit easy if you just say that the SSM is a question for lawyers, because at the core of all our problems is the fact that there are basically three ways to go. One is to have a banking union, maybe a fiscal union and a form of European federation with a common constitution, and thereby keep the euro area going. The second is to go on muddling through, giving more power to executives, more power to eurocrats in Brussels and in Frankfurt – ultimately fiscal control by some people in Brussels that nobody elected. So, on the one hand, we will lose democratic and republican values, but keep the euro. OK – maybe that is the price we have to pay. And the third is to accept that if we want to stay democracies and republics, we have to give up the euro.

Draghi: “And do nothing in the meantime”. That is the third option. But I am not sure whether I understand your first option.

Question: The first option is to have a European federation with a common constitution and a single supervisory mechanism, and the President of the SSM is responsible to European governments or the European Parliament, who can hire and fire that man. Who should ultimately fire the SSM President if he makes a mistake? Should that be the 17 or 27 individual governments, which would have to agree?

Draghi: I think, in a sense, that I have already explained this. The ECB does not have a preference for one solution or another. The ECB has been asked to undertake this task, and if it is decided that this should be the case, it will do so to the best of its ability. It is up to the Council, to national leaders and to finance ministers to decide. I have been clear since the very first press conference on the ECB’s conditions for accepting this task – namely that it should be in a position to carry it out in a decisive, firm, complete and strong manner without any reputational risks. And second, that new tasks should not be mixed with our monetary policy tasks – delivering price stability in the medium term – which for us remain the primary tasks. The rest is really in the hands of others, not us.

Question: I have two questions: first, what is your response to the budget unveiled yesterday by the Irish government?

Second, in light of the commitments made by the Irish government and borne by the Irish people, is it reasonable or not at this point to expect that there will be an agreement to recast the Anglo-Irish Bank promissory note scheme before the next payment falls due in March, and why?

Draghi: On the first point, we surely welcome the action by the new undertaking, and presenting the new budget is a reaffirmation of the successful commitment of the Irish government to restore sound economic conditions, both fiscal but also more broadly structural conditions.

On the second point I think we have discussed this in the past. The ECB cannot undertake any agreement, cannot enter into any agreement that is being viewed as monetary financing and is forbidden by Article 123 of the Treaty. But other than that, there is plenty of good will.

Question: The Spanish government does not want to apply for the OMT because they want to be sure that if they ask for your help the risk premia will drop to 200 points. Are you open to negotiate this possibility?

And another question: will the OMT by itself be enough to guarantee market stability during the next year?

Draghi: Well, I think I was asked the same question before with respect to Spain, Italy and so on. The conditions under which the OMT is going to be activated are very straightforward and are pretty clear. We have made them clear several times. They do not talk about negotiations or agreements on a certain interest rate or anything like that. So, I would say, when you are asked about this, refer to the press communiqué announcing the OMT and it contains all the conditions that are needed to activate it.

On the second question, we said that the main aim of the OMT is to remove tail risk to overcome monetary and financial fragmentation of the euro area that would stem from a redenomination risk. And we would do it in a size that would be adequate to achieve its objective.

Question: This morning, the four presidents’ report setting up the operational framework for direct bank recapitalisation through the ESM was released. Will this exclude legacy debt?

And if I may ask another question: why are euro bonds explicitly not mentioned in this report?

Draghi: Well, I cannot really comment on the report as such, because it is a process, it is coming out, it is in the making – it still can be modified by further discussions. But I can comment on both issues you have raised. It is quite important that legacy assets have been carefully defined. In other words, we all want to know exactly what it means. That is very important for the policy-makers, but also for the markets and for the banks. So, when the position was taken that the new ESM could not be used to fill holes created by legacy assets which had gone sour, I think one has to define exactly what these legacy assets are. So far it is just a name.

Your second question was about euro bonds. Here we have to understand that, originally, there was a breach of trust in the euro area between countries that were basically always complying, or most of the time complying, with fiscal soundness and countries that did not do so. In the last two years the issue has been to rebuild trust. For this purpose, fiscal rules were agreed, fiscal compact was agreed; there were a lot of actions the common denominator of which was to have constraints on fiscal discretion; a lot of actions that will necessarily amount to a sharing of national sovereignty insofar as budget and debt are concerned. At the other end of the spectrum you have what we call mutualisation of risk. A euro bond is an example of this. It is pointless to begin from a euro bond; it is pointless to begin from a policy where, if I can sort of summarise this policy, I issue and you spend, because this is not realistic. It will become realistic, however, when the trust is re-established; when there is clear evidence that basically all countries comply with the commitments and undertake economic policies with full awareness of their consequences upon other countries.

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