Introductory statement with Q&A
Jean-Claude Trichet, President of the ECB,Lucas Papademos, Vice President of the ECBFrankfurt, 14 January 2010Jump to the transcript of the questions and answers
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our first press conference in 2010. Let me take this opportunity to wish you all a Happy New Year. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by Commissioner Almunia.
Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. Taking into account all the information and analyses that have become available since our meeting on 3 December 2009, price developments are expected to remain subdued over the policy-relevant horizon. The latest information has also confirmed that towards the end of 2009 euro area economic activity continued to expand. However, some of the factors supporting the growth in real GDP are of a temporary nature. Overall, the Governing Council expects the euro area economy to grow at a moderate pace in 2010, recognising that the recovery process is likely to be uneven and that the outlook remains subject to uncertainty. The outcome of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, given the ongoing parallel decline in money and credit growth. All in all, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term.
Let me now explain our assessment in greater detail, starting with the economic analysis. Following the 0.4% quarter-on-quarter increase in real GDP in the third quarter of 2009, the latest information confirms that towards the end of last year economic activity in the euro area continued to expand. The euro area has been benefiting from a turn in the inventory cycle and a recovery in exports, as well as from the significant macroeconomic stimulus under way and the measures adopted to restore the functioning of the financial system. However, a number of the supporting factors are of a temporary nature. Furthermore, there is likely to be a drag on activity for some time to come on account of the ongoing process of balance sheet adjustment in the financial and non-financial sectors, both inside and outside the euro area. In addition, low capacity utilisation rates are likely to dampen investment, and unemployment in the euro area is expected to increase somewhat further, thereby lowering consumption growth. For these reasons, the euro area economy is expected to grow only at a moderate pace in 2010 and the recovery process could be uneven.
The Governing Council continues to view the risks to this outlook as broadly balanced. On the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. Confidence may also improve further, and the global economy as well as foreign trade may recover more strongly than projected. On the downside, concerns remain relating to a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector, renewed increases in oil and other commodity prices, the intensification of protectionist pressures and the possibility of disruptive market movements related to the correction of global imbalances.
With regard to price developments, as expected, euro area annual HICP inflation increased further in December 2009 to stand at 0.9%, after 0.5% in November. The rise mainly reflects upward base effects stemming mostly from the drop in global energy prices a year ago. Inflation is expected to remain around 1% in the near term. Looking further ahead, inflation is expected to remain moderate over the policy-relevant horizon, with overall price, cost and wage developments staying subdued in line with a slow recovery in demand in the euro area and elsewhere. In this context, it is important to emphasise, once again, that inflation expectations over the medium to longer term remain 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 this outlook remain broadly balanced. They relate, in particular, to the outlook for economic activity and the evolution of commodity prices. Furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years.
Turning to the monetary analysis, both the annual growth rates of M3 and loans to the private sector were negative in November, standing at -0.2% and -0.7% respectively. The concurrent declines to historically low growth rates recorded in these two series over the past months support the assessment of a decelerating underlying pace of monetary expansion and low inflationary pressures over the medium term. Looking ahead, M3 and credit growth are likely to remain very weak or negative for some time to come.
The decline in actual monetary growth is likely to overstate the deceleration in the underlying pace of monetary expansion. This is due to the continued steep slope of the yield curve, which explains shifts of funds out of M3 into longer-term deposits and securities. At the same time, the interest rate constellation continues to foster divergent developments in the main components of M3, as the narrow spreads between the rates on different short-term bank deposits reduce the opportunity costs of shifting funds from, for instance, short-term time deposits into overnight deposits. As a result, M1 continued to grow at a robust annual rate of 12.6% in November, when annual M3 growth turned negative.
The negative annual growth of bank loans to the private sector conceals a return to positive annual rates of growth in the case of loans to households, while the annual growth of loans to non-financial corporations became more negative. Such divergence remains in line with business cycle regularities, with turning points in the growth of loans to enterprises typically lagging those in economic activity. In the case of households, the latest data provide further confirmation of a levelling-off at low rates. In the case of non-financial corporations, the decline in loans continues to reflect mainly a strong net redemption of loans with a shorter maturity, while lending and borrowing at longer maturities remained positive. The subdued levels of production and trade, as well as the ongoing uncertainty surrounding the business outlook, will probably continue to dampen firms’ demand for bank financing in the months to come. In the meantime, financing conditions for enterprises have improved over recent months in terms of the cost of both bank credit and market financing. In this respect, the continued negative flows in short-term bank loans to non-financial corporations observed in recent months may partly reflect better possibilities for substitution with different sources of longer-term financing.
Banks have continued to reduce the size of their overall balance sheets, mainly through downsizing the assets held vis-à-vis other banks. The challenge remains to adjust the size and structure of balance sheets while ensuring the availability of credit to the non-financial sector. To address this challenge, banks should use the improved funding conditions to strengthen further their capital bases and, where necessary, take full advantage of government support measures for recapitalisation.
To sum up, the current key ECB interest rates remain appropriate. Taking into account all the information and analyses that have become available since our meeting on 3 December 2009, price developments are expected to remain subdued over the policy-relevant horizon. The latest information has also confirmed that towards the end of 2009 euro area economic activity continued to expand. However, some of the factors supporting the growth in real GDP are of a temporary nature. Overall, the Governing Council expects the euro area economy to grow at a moderate pace in 2010, recognising that the recovery process is likely to be uneven and that the outlook remains subject to uncertainty. A cross-check of the outcome of the economic analysis with that of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, given the ongoing parallel decline in money and credit growth. All in all, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term.
We will continue our enhanced credit support to the banking system, while taking into account the ongoing improvement in financial market conditions and avoiding distortions associated with maintaining non-standard measures for too long. The Governing Council will also continue to implement the gradual phasing-out of the extraordinary liquidity measures that are not needed to the same extent as in the past. In order to counter effectively any threat to price stability over the medium to longer term, the liquidity provided will be absorbed when necessary. Accordingly, we will continue to monitor very closely all developments over the period ahead.
As regards fiscal policies, many euro area governments are faced with high and sharply rising fiscal imbalances. The very large government borrowing requirements carry the risk of triggering rapid changes in market sentiment, leading to less favourable medium and long-term market interest rates. This, in turn, would dampen private investment and thereby weaken the foundations for sustained growth. Moreover, high levels of public deficit and debt would place an additional burden on monetary policy and undermine the credibility of the provisions of both the Treaty on European Union and the Stability and Growth Pact as a key pillar of Economic and Monetary Union. The Governing Council therefore calls upon governments to decide and implement in a timely fashion ambitious fiscal exit and consolidation strategies based on realistic growth assumptions, with a strong focus on expenditure reforms. Tax cuts should only be considered over the medium term, when countries have regained sufficient room for budgetary manoeuvre. In this regard, current government commitments to start consolidation in 2011 at the latest and to go well beyond the structural benchmark for adjustment of 0.5% of GDP per annum represent the minimum requirement for all euro area countries. The success of fiscal adjustment strategies will also depend, crucially, on appropriate national budgetary rules and institutions and requires transparent budgetary procedures, as well as reliable and complete government finance statistics.
Turning to structural reforms, an appropriate restructuring of the banking sector should play an important role. Sound balance sheets, effective risk management, and transparent as well as robust business models are key to strengthening banks’ resilience to shocks, thereby laying the foundations for sustainable economic growth and financial stability.
The Eurosystem will submit its response to the European Commission’s public consultation on the EU 2020 strategy, which is designed as a successor to the current Lisbon strategy. To address future challenges, the EU 2020 strategy should focus on raising potential growth and creating high levels of employment through well-functioning labour and product markets, sound financial systems and sustainable fiscal policies. The aim is to achieve a highly competitive social market economy, as spelled out in the Treaty.
We are now at your disposal for questions.
Transcript of the questions asked and the answers given by Jean-Claude Trichet, President of the ECB, and Lucas Papademos, Vice-President of the ECB
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Question: How concerned are you at the ECB about the deterioration of some sovereign debt situations, most notably, but not exclusively, in Greece?
And my second question, I almost hesitate to ask, but many American and English bank market watchers keep putting this across to us: how realistic do you see this talk about Greece or possibly other countries either being pushed out of, or leaving, the euro? As I said, it has been put to us time and time again. It sounds very unrealistic, but how do you view this?
Trichet: Let me take your second question first. I do not comment myself on absurd hypotheses, so that would be my response. That being said, there is a lot of hard work to do, and you can see the extent to which the Governing Council has been stressing the necessity to have appropriate measures and appropriate implementation of the measures as regards fiscal policy. This is key for all countries. Our message is for all members of the euro area. It is very important for those of them which have a special deterioration to redress the situation in taking the appropriate bold and courageous measures for their own prosperity and recovery. We trust that this is essential to improve confidence, and you know the extent to which we consider that confidence is key in the present economic situation in Europe as well as in the world.
Question: You just mentioned confidence. Are you more confident now than, let us say, five weeks ago that the Greeks will actually be able to reduce their budget deficit to less than 3% by 2012?
And let us say Greece’s credit ratings were BBB+ across the board in December: would you consider delaying a return to the old collateral rules?
Trichet: We will not change our collateral framework for the sake of any particular country. Our collateral framework applies to all countries concerned. And that has been said already by the Vice-President, by me and by colleagues. That is crystal clear.
As regards your second question I will not comment on the ratings. I will only say that, as far as I know, the Greek government, the Greek Council of Ministers, is taking a number of decisions today. I have had absolutely no time to look at the decisions that are being taken. I know that the intention is to deliver a public finance deficit that, if I am not mistaken, would be below 3% as soon as 2012. We will look at and examine this very carefully. But this is information which is coming in now, because the Council of Ministers met this very morning.
Question: Have you discussed under which conditions you will offer the final six-month loans, and is there a growing feeling on the Council that markets are ready for competitive bidding on your MROs after April?
And do you see any risk at all of a set back of the euro zone’s recovery in the first quarter?
Trichet: As regards the handling for the last six months operation, we already decided that it will be the last, as you know. As regards the MROs after the first quarter we did not discuss which way we will proceed. All these decisions will be taken at our first meeting in March.
As regards your second question, I have been very clear on behalf of the Governing Council. We consider that, as we have frequently said, we have a period in front of us which is, fortunately, in black figures but which is uneven. I often use the expression “we have a bumpy road ahead of us”. So there is a great level of uncertainty and we could pretty well have a rate of growth from quarter to quarter that would go up and down. I do not exclude that. As an average for next year, the mainstream of experts and analysts, as well as our own staff, is projecting slightly positive growth. But the uncertainty is quite high and I have mentioned the fact that around this baseline scenario we see risks on the upside and also on the downside. So, we have to remain very alert, very prudent. And you know, since the start of the black figures, we have never claimed victory. We have always said we have to remain alert and prudent. That was the essence of the communication of the Governing Council.
Question: Again on interest rates, and looking forward, Jürgen Stark, your colleague, last week said that he doesn’t see any danger really to price stability until the end of year, that is. Do you agree with his assessment? And what does this really mean for the ECB’s ultra expansionary tools that are currently in the market.
And last, but not least, we’ve been talking to more than 60 economists. All agree, on average, that some 50 basis points in rate hikes will occur at the end of this year. Do you have any message to them with regard to the expectation of that?
Trichet: First of all, as regards our monetary policy, the position of the Governing Council is crystal clear. And I’ll just sum it up on behalf of the Governing Council: we are looking at inflation in the medium term, price stability in the medium term, and we see at the moment I am speaking no risk for a destabilisation of our prices. That being said, you have uncertainty and risks in both directions. But we see that they are balanced.
As regards your second question I will not say anything on future interest rates. You know our position. It is a clear-cut position. We always take decisions that are appropriate to deliver price stability in the medium term. It is what has permitted us to anchor, very solidly, inflation rate expectations and that is essential in all circumstances, including in very difficult circumstances like today. I will not comment on the market pricing-in future decisions.
Question: Has the ECB or other institutions which have been created for reforms in the financial system done their job properly? How do you see it?
And then, for the credit crunch, I hear that you are a little bit less pessimistic. Is that true?
And do you think there is a necessity that government supports the risk of lending by banks so that banks are more encouraged to lend?
Trichet: On the first question, as you know, we have enormous difficulties ahead of us. We did our job properly in the past because we took very bold decisions and avoided depression. It is extremely important that all the economic agents realise the seriousness of the situation we would have had without the rapidity and the boldness of the decisions taken by the ECB and other central banks or the decisions of our governments. We avoided that, but we still had a big recession and a lot of problems. We are called upon to reform the financial system. I have to say that the work which has been done by all of us,– I’m speaking in particular of the ECB’s Governing Council as a whole and of a number of members of the Governing Council in various positions, and also of the international community – was as good as possible a job. But this is no time for complacency. I think that the Financial Stability Board (FSB) did a very good job in such a difficult situation. A member of the Governing Council chairs the FSB. The Basel Committee has done a very good job and it is also a member of the Governing Council who is very active there. And I would say that the G20 has been extremely important in enlarging global governance as well as in working out a consensus on the methodology and goals for drawing the lessons from the crisis. But again, this is no time for complacency. We have a very hard job ahead of us. I have already told you that we cannot afford to have a financial system which is as fragile in the future as it has proved to be in the past. Our democracies in particular would not accept that. And, in my opinion, would not stand ready to do in the future what they have accepted to do in the past. So we are obliged to find appropriate ways for making the system more resilient.
As regards your second question on the credit situation, as I have mentioned, overall loans to the private sector are now in negative figures. The figures last October were already negative, and the November figures confirmed these at -0.7%. , so I would say slightly negative. We have observed, and this is something we have to monitor very carefully, that loans to households were back to black figures in November after having been slightly negative in October. They are now at +0.5%. We are not surprised, as I said earlier that unfortunately loans to non-financial corporates are in negative figures, (-1.9%) even if we observe negative figures for short-term loans and still black figures for longer-term loans over five years in particular. We are monitoring that very carefully. We had a very deep recession and what we have always observed in such cycles is that there are lagged effects for the outstanding credit growth for non-financial corporates. So we expect that these red figures may continue for a number of months, both for loans to non-financial corporates, for overall loans to the private sector and also for M3 which were slightly negative in November. I have explained already why the dynamics inside the various components of M3 were extraordinarily different. This is not surprising taking into account the present level of interest rates
As regard your last question I will not suggest that, at this stage, taking into account the very important and bold decisions already taken by governments, our democracies will necessarily renew what they accepted to do at the peak of the crisis.
Question: Very recently, Jürgen Stark emphasised it would not be allowed legally for any Member State to help out Greece or any other Member State with its fiscal problems. Does this legal interdiction in the Treaty, as you understand it, also refer to EU institutions?
Trichet: I have already said what I had to say with regard to our own position. No government, no state can expect any special treatment from us. We have our own rules, and we will apply our own rules without special treatment of any kind. We know that some governments – one in particular, but not only one – that several governments have very tough and very difficult decisions to take. But the problem of “help” is not the real problem. By belonging to the euro area, you are already helped because in particular you have an easy means of financing your current account deficit. You share a currency that is credible, so that you have a quality of financing that corresponds to that of a credible currency. The problem is thus not one of “help”. The problem is one of doing the job, of taking the appropriate decisions. That is what is at stake.
Question: Mr Trichet, was the decision about interest rates unanimous and were any other options discussed?
And the second question is for Mr Papademos. Mr Papademos, what role might you play in Greek political affairs after you leave the ECB?
Trichet: Good question – we were unanimous in our decision.
Papademos: You will not be surprised if I say that I will not give an answer to your question. When I leave the ECB, I will examine the prospects and will inform you in due time.
Question: My colleague claimed that the possibility of Greece leaving the euro area is almost impossible, but yet black swans are something that we have to reckon with. Is the ECB therefore drawing up contingency plans?
Trichet: I already answered that question.
Question: Mr Trichet, do you expect the EONIA to remain at its current level for the first half of the year?
And my second question: Recently, Slovenian and French politicians have complained about the strength of the euro. What is your message to them? And do you think that the euro is correctly overvalued?
Trichet: In answer to your first question, the EONIA is the product of market functioning and I am not surprised that it is quite close to the deposit rate, given the level of liquidity that is in the market. We will see what happens. In any case, a number of observers are noting that, owing to our past decisions, in particular those associated with the 12-month operations, liquidity will be abundant for a number of months. As long as this liquidity is abundant, it is not surprising that the EONIA is close to the deposit rate.
As regards exchange rates, I would say, that I fully support and share what Ben Bernanke has said on a number of occasions, namely that a strong dollar that will inspire confidence is important for the interests of the US economy. This is also the opinion of Tim Geithner, Secretary of the Treasury.
Question: Mr Trichet, beyond the fiscal question of Greece and some of these other smaller countries in Europe, it seems that they face a lengthy period of adjustment to improve their competitiveness. So you could see a scenario where you have two camps in Europe: countries that make a normal adjustment out of recession and countries that have several years where they make these adjustments to the labour markets and their finances. How much of a risk is that for monetary policy that has to set interest rates for the region as a whole?
Trichet: We are running a currency for 16 countries. Since the very beginning, we have had countries that have been in a situation in which they have had to adjust and regain the competitiveness that they had lost. In 1999, some countries had it very easy in terms of competitiveness, whereas others had only progressed so far in terms of their own structural reform programmes. Thus, for us this is the permanent situation, which we are having, to run the single currency for 330 million citizens across 16 countries. At the moment, it is clear that there are some countries that have done a lot of good work in terms of structural reform and others that still have a lot to do if they want to improve their growth potential. Structural reforms are of the essence in order to elevate the growth potential of the euro area as a whole and of a number of economies in the euro area in particular. It is also clear that a number of countries, for example Greece and Ireland have to engage in a decisive strategy that would reinforce competitiveness, as well as generate growth and jobs. We operate in very much the same way as the Federal Reserve System, with our large set of countries, and each time that we have looked at various indicators such as growth, inflation, unit labour cost evolution, in Europe and compared these with the United States, we have found more or less the same order of magnitude of standard deviation. This therefore seems to be the characteristic of a very vast single economy of more than 300 million citizens.
Question: You specifically mentioned Ireland in your last remark. What specifically remains to be done by the authorities in Ireland to re-stabilise the Irish economy and put it again on to a growth trajectory?
Trichet: Let me only say that what I have seen coming from Ireland has been quite impressive in terms of adjusting to new circumstances without losing time and not hesitating to take the kind of bold and courageous decisions I have mentioned in order to put the economy back on its feet. These are very difficult and demanding circumstances. Without giving details, what I have seen until now seems to me to be going in the right direction.
Question: Just one further point on Greece. When you considered the balance of risks for the euro zone, did you consider the risk of fallout in confidence from the situation in Greece at the moment, beyond Greece’s borders?
Second question: You mentioned the European Union’s 2020 strategy and I understand your response will be given at a later date. Do you have any ideas for how the 2020 strategy can be made more effective than the Lisbon strategy? There has been a proposal of sanctions which has been rejected already. How would you go about making sure the strategy works?
And thirdly, you talked about EONIA and short-term market interest rates. I am confused about how this all would work and your thinking on this. I know you try to distinguish between monetary policy and aid for the financial markets. When it comes to bringing market interest rates back up to the main policy rate – which it is expected you would do in the course of this year, maybe after April once you end the unlimited or full allotment procedure – will that be only done in line with developments and improvements in financial markets or will that also be part of your monetary policy strategy?
Trichet: First, we have to get this into perspective. If I am not mistaken, the order of magnitude of the percentage of Greek GDP in terms of the euro area is approximately between 2.5% and 3%. This should be borne in mind, compared with the share of California for instance, in the overall GDP of the USA.
Second, speaking very cautiously, I think that the consolidated deficit for the euro area as a whole is between 6.5% and 7%. This should also be compared with the deficits on the other side of the Atlantic. It is a significant challenge, one which we experience as a single market with a single currency, but it has to be placed in perspective when considering the vulnerability of the euro area overall. All that being said each country has to do their job in their own interests. And the problem is not to get help; the problem is to help oneself. That is clear and I think the message is easily understandable. As regards the 2020 strategy, we have to recognise that the Lisbon strategy was not implemented in an appropriate way, despite the fact that the executive branches gave their full commitment to it each time that there were meetings at every level. In my opinion, we have to improve not the goals, but how they are implemented. Peer surveillance must function much more efficiently than it has done. Using best practices as a benchmark seems to be the obvious thing to do when you look at the European Union. It is natural to look at friends that have done well in various domains and to take advantage of their efficiency and effectiveness by doing the same. I therefore expect a lot from very precise, attentive benchmarking, with the full commitment of the European Commission and governments. We will try to help as much as possible ourselves, and it is obvious that we could do much better if we were to improve our structural position, which gives us a very powerful motivation.
With regard to your third question, I will only say that the EONIA was affected by the way in which we handled our supply of liquidity on the back of the exceptional circumstances during the crisis. The way in which we supplied liquidity, in particular the fixed rate tender procedure with full allotment, pushed the overnight rates close to the lowest point in the corridor, namely the deposit rate. As I have already said, it is obvious that this would be the case. We accept it fully. It is part of market functioning and we consider it to be fully in line with our monetary policy. When we change the way in which we handle liquidity, there will be a change in the position of the EONIA in the corridor, which is defined by the interest rates of the marginal lending and of the deposit facilities, with the main refinancing operations in between.
Question: I have a question concerning banking supervision or financial market supervision. Since this morning, the German government seems to be speeding up the plans to fully entrust the Deutsche Bundesbank with banking supervision. Now, some days ago, I talked to a lawyer and he said it’s just a crazy idea that the Deutsche Bundesbank be entrusted with banking supervision. His argument was that if the central banks were not very careful, they would give up some of their independence if part of the banking supervision were subject to the Ministry of Finance. At least it would be an open door for governments to walk into the decision-making of the central bank. Now is that true? Do you share my opinion?
Trichet: My response would be the following:
First comment: it is very important that banking supervision be independent from the government. This is part of the core principles of Basel. It was one of the main conclusions of the Asian crisis, in which it became clear that a lot of economies and countries had banking supervision that was under permanent political influences and the result of this was not good.
Second comment: Governments are of course in a very important position of responsibility, particularly in times of crisis, because they are responsible for taxpayers’ money. And in the most recent period of crisis, they had – unfortunately - to play a very important role in this respect. It is not to say that governments do not have immense responsibilities, but banking supervision itself must be executed by very serious independent institutions, whether it is carried out by the central bank or close to the central bank.
Third comment: banking supervision is organised in all possible ways in industrialised countries and the rest of the world. In some cases, it is totally out of the sphere of central banks and in others there is a very close link between the central bank and banking supervision. Even inside the euro area, there are a lot of different concepts. Nevertheless, the Governing Council of the ECB has always said publicly that we trust that it is better to have a close relationship between the central bank and banking supervision. It has been the position of the Governing Council of the ECB - we made that public and it has not changed. We do not pronounce on whether or not it should be the concept applied in Italy, Spain, France or possibly Germany or, tomorrow, in other countries in the European Union, but only that there should be a close relationship.
It in any case goes without saying that central banks have to be independent, particularly in view of the Maastricht Treaty, which gives central banks fierce independence vis-à-vis the political sphere. As I have already said, we consider it appropriate that there is a close relationship between the central bank and banking supervision, which appears to be a growing trend at the moment also in Belgium and Germany. We will see what happens in other countries.
Question: This actually leaves the key question open. Imagine if Deutsche Bank was to get into severe difficulties and to be wound up. Who would take that decision – the Deutsche Bundesbank or the government? Who would be responsible for winding up the institutions?
Trichet: If taxpayers’ money is at stake, then it goes without saying that the involvement of the government is absolutely necessary. If decisions that are not involving taxpayers’ money are taken, it has to be the supervisory authority. You could well imagine that you would separate the function of the central bank and that of the supervisory authority in a very appropriate fashion. A number of institutions do this. I have nothing against the approach of the German government. It must be carefully monitored how this will work in practical terms. Of course, it is essential to fully respect the independence of the board of the central bank. I will also say again that you should never confuse the role of the supervisory authority with the involvement, when unfortunately necessary, of the Treasury.
Question: Mr Trichet, you were crystal clear on Greece and the other countries when you said that it is not a problem of help but a problem doing their job. I would therefore also like to ask if there is any chance that the ECB or any other institution might help Greece to do their job? I don’t mean in terms of a bail-out, but in terms of knowledge, staff and other things. Do you consider there to be any other special measures?
Trichet: It goes without saying that the Eurosystem also comprises the Bank of Greece and that we are permanently working within the full body of the Eurosystem, in particular of course the countries concerned. Within the limits of our own responsibilities, we will do everything that we can, in technical terms, to help the Greek government to head in the right direction. However, this is primarily the responsibility of the Commission and the EU Council.
Question: Would you say that Spain has done the job? And if not, what is the message you would send to the Spanish government?
And more generally, Spain just took over the Presidency of the European Union in January. What are you expecting from this six-month period?
Trichet: I will not give good marks and bad marks to individuals – that is not the way we work here.
As regards your second question we, of course, expect a lot from the Presidency of Europe, which is a very important function, together with that of the new President of Europe, Mr van Rompuy. I have to say that all Council meetings with ministers have to work as well as possible. I am sure that the Spanish Presidency is totally dedicated to providing a very good Presidency during these six months, and from what I have seen, it is being taken extremely seriously and handled well by the Spanish government. And, of course, Spain, like the other 16 countries, has homework to do.
Question: You said that the break up of the euro area was an absurd hypothesis, but why then did the legal team of the ECB publish a paper dealing exactly with that question?
Trichet: It was not the legal team of the ECB. It was one individual and there was the usual disclaimer – ( The views expressed in this paper do not necessarily reflect those of the European Central Bank) that it was his opinion and not that of anyone else. I totally disagree ( with some analysis of the paper).
Question: This morning, before the Greek cabinet meeting, we had the opportunity to talk to the Greek finance minister, and he basically said that Greece has a credibility deficit. Do you, in turn, have a trust deficit or will you take every number that will be published tomorrow and every statistic in the three-year plan at face value?
Trichet: I said, on behalf of the Governing Council, that we consider the credibility of the figure to be absolutely essential. And you might have seen that this sentiment is completely and publicly shared by the Commission. It seems to me that the lessons from the past absence of credibility are such that the government in question is getting the message very clearly, but we will see what is being done. It is absolutely crucial. I saw that some kind of decision was about to be taken; Lucas, would you provide further details?
Papademos: As the President said, we have just received information about the stability programme, but one positive element of the programme is to confirm the previous announcement about the establishment of an independent national statistical authority. This authority will ensure – and I think this should definitely be the aim – the quality and reliability of fiscal statistics once and for all. What is important is that such authority will function in full independence and that it will ensure that statistics will be complete, reliable and provided in a timely manner. Implementation is key!