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ECB’s Trichet Discusses Policy, Economy (Q&A, Transcript)

Dec. 2 (Bloomberg) -- European Central Bank President Jean-Claude Trichet responds to questions about the central bank’s monetary policy.

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

QUESTION: Question one is about the ECB’s exit strategy with the latest decisions you made on the repos on the three month and the one month. It sounds as if the exit strategy has been put - or the exiting from extraordinary measures had been put on hold, at least until the second quarter of 2011. Is that a correct assessment?

Secondly, on bond purchases, can you tell us a bit more about the recent ECB activities on the bond purchase program, also vis a vis some market demands about sterilization or not sterilization? Are you still fully sterilizing whatever you buy in the bond markets? Thank you very much.

JEAN CLAUDE TRICHET, PRESIDENT, ECB: Thank you very much, indeed. Your questions are covering a large scope, of course, of issues that are important. I would say, responding to your questions, that I see five points in what I said that are particularly worth noting in responding to your questions.

First, of course, we consider for our monetary policy stance, the present interest rates as appropriate, as I said, to deliver price stability in the medium run.

The second point - and that is very important - our non standup measures are there to permit the appropriate transformation of the standard measures of this monetary policy stance that I said was appropriate.

Third, we have decided to maintain full allotment for the first quarter of next year. As I said, and I explained in the introductory remarks, not only the MROs, not on the one month refinancing operations, but also the three months and up, our judgment is that it is appropriate to pursue this non-standard mode, taking into account the transmission of monetary policy.

The fourth point is that the governing council considers that as I said two days ago, that the SMP program is ongoing. I repeat, the SMP program is ongoing. I will not comment on the observation of market participants. I draw your attention to the fact that of course what we are doing in this domain is commented by markets. I will say that we will continue to withdraw the liquidity that we are injecting through the SMP program as we had decided since the very beginning. And you know pretty well the tool that we utilized to that end.

And I would say that the last point, perhaps, we will continue to be permanently alert to have the right monetary policy stance. Our credibility is that we deliver price stability in line with our mandate. It is the treaty mandate we deliver 1.97 percent yearly inflation over the first 12 years. You will tell me that I repeat that. But I think it is very important.

By the way, I mentioned (inaudible) that I said that of course to the member of Parliaments in Brussels to tell the group. And I could see to which extent of the representative of the European people that were enormously appreciating the fact that we had delivered over the first twelve years in line with our mandate - our primary mandate. We even had applause. I don’t draw any conclusion from that. But I was moved. I was moved.

And now of course, our non-standard measures are there to permit appropriate transmission of the monetary policy stance. It is what we have done, it is what we are doing.

Thank you very much for your question, ma’am. Please?

GABI THESING, BLOOMBERG NEWS: Hello? Gabi Thesing, Bloomberg News. I have two questions.

Would you still describe your government bond purchase program as temporary? And secondly, was there unanimity in delaying the exit strategy? If not, can you give us an indication what other options were debated? And did you also discuss ramping up the bond purchases? Thank you.

TRICHET: On the first point, I would say, again, we have to be commensurate to what we observe in the functioning of the various transmission channels for our monetary policy. So we are commensurate any time to what we are observing in terms of market dysfunction or absence of normal functioning.

Of course our working assumption is that we will be back to normal functioning. When we are back to normal functioning, we interrupt all non-standard measures by construction by definition. They are temporary because precisely, they are commensurate to the absence of normal functioning of a number of markets - some segments of markets. But I confirm what I said, that very clearly, that they are temporary in nature.

As regards the decision we have taken, I would say that we have consensus for the decision we took on the three months. And we have the overwhelming majority I’ll always refer to as regards the SMP. And let me only say that what counts, of course, is the governing council. This is the entity that is responsible for, as I said, delivering price stability to the fellow citizens of Europe, as we have done, and will continue to do. Thank you very much, ma’am. Sir?

SIMON CARSWELL, IRISH TIMES: Mr. Trichet, Simon Carswell with the Irish Times. And Mr. Trichet, there’s a view in Ireland that the ECB forced Ireland into taking - into seeking external financial assistance. And that this may not have been done with Ireland’s best interests at heart, but in the interests of the euro. And I’m just wondering what your reaction to that would be.

TRICHET: I would only say that it goes without saying that it’s been the decision of the government of Ireland, and that all those who have discussed with the government of Ireland concluded that it was necessary, of course, to engage in this adjustment program. The IMF, the commission in (inaudible) with us, and also those of the European governments - namely the (inaudible) - have decided to accompany these efforts that are necessary. Thank you.

RALPH ATKINS, FINANCIAL TIMES: Ralph Atkins from the Financial Times. Can I just ask you to elaborate on your answer earlier? You said that there was an overwhelming majority in support of your position on the SMP. Does that mean that there were some in favor of you coming out with something stronger by way of statement today?

And secondly, you say that the SMP will be calibrated according to your perceptions of the degree of disruption in the markets. Could you give us some flavor of how you assess the level of disruption in the markets at the moment considering the apparent high risk of defaults for countries - even countries such as Spain, perceived by financial markets? Would you not say that at the moment, the levels of disruption in financial markets are pretty high? Thank you.

TRICHET: Thank you very much for your question. I would say again, on what I just said on the SMP, which is ongoing, and again, is observed by markets with great attention, it is designed to permit the best possible transmission of our monetary policy under the present circumstances. And it is the way we are looking not only at the SMP, but at all our non-standard measures. And it is also for that reason that we have decided to maintain the full allotment fixed rate for the three months window for refinancing in particular.

I have no other comment than that. And again, I say, we are constantly alert. We are constantly looking at the situation of the markets, and at the acute tensions that I was mentioning in the introductory remarks. And we continue to apply our doctrine, which is separating standard and non-standard measures. The non-standard are there to permit appropriate transmission of the standard measure.

Of course you heard also all what I said on the decisive importance of the decisions taken by the executive branches, by the governments in the present circumstances. Again, we have ourselves a mandate. The mandate is clear. We give the benchmark ex-ante before the start of the euro. We have delivered exactly as we had said we would deliver. Everybody can judge that.

And we are credible for the same level of price stability in the years to come. We have tensions, and we have to take into account those tensions to be sure that we continue to deliver, to our fellow citizens, price stability.

And of course we expect the executive branch of the governments to do themselves what we trust they have to do. By the way, what they have to do, according to the treaty itself, of course. Thank you very much for your question.

QUESTION: (Inaudible). Mr. Trichet, commenting on the Irish crisis, the President of Iceland, Mr. Grimsson, a couple of days ago pointed to the fact that the solution adopted by Iceland of separating the domestic debt of the banks from the foreign debt of the banks allowed the country to be today much better off, so that the country - so that the government not only could protect its citizens, but could also renounce to the full amount of the IMF loan.

My question is what prevented you from acknowledging the success and suggesting the same solution for Ireland?

My second question is related to the disclosure of Federal Reserve data on loans given to the banks at zero interest rates yesterday in the United States, which has created - is creating some backlash, especially because of the long list of European banks which used the Federal Reserve money.

So that at the order of the disclosure bill, Senator Sanders, who is an independent who has been reelected, said yesterday in a press conference that Congress will now monitor much more closely Fed loans abroad. And he added that this will give Congress more authority to push for the reintroduction of bank separation - the famous Glass-Steagall Act. I’m not going to ask you my regular question on this, because I know what your opinion is.

TRICHET: Thank you. I was fearing that you will have the third one. But you had two. That’s okay.

QUESTION: No, my second question -

TRICHET: Have only two.

QUESTION: There was no question.

TRICHET: I have already two - there was no question. Then if there is no question, sir, I listened very carefully. But -

QUESTION: This is the question. This is the question.


QUESTION: Will this - how will this affect whether this will affect Europe?

TRICHET: Thank you. First, I have no particular comment on the declaration on the President of Iceland, which I didn’t read. So it’s not usual for me to comment on things I didn’t read. I take it that the plan, which we considered a good one, as I said a moment ago, has been discussed thoroughly with the IMF and with the commission in (inaudible) with us.

On the second question, I would only say that those European banks that are in the list had activities. And all what has been done was within the framework of global finance. And we are all interconnected, obviously.

I think that this is part of what is, in my opinion, extremely important - that we continue to have an interconnected global finance, but also with level playing field, with fair treatment, with absence of going back to - I would say - some kind of inward looking in all various marketplaces.

We need fair treatment - we need open and fair treatment. And I think that it is really what we are doing at a global level, as you know. It is the doctrine that we have. We have the same rules everywhere to apply the same rules to all those who are participating.

So I have no other comment on that. But I trust fully all other partners, not only the United States and the Fed, but also all other partners in the world, including in the emerging world. Thank you very much, indeed. Sir?

QUESTION: Mr. Trichet, (inaudible). You described the SMP program as an instrument to get done your monetary policy in abnormal circumstances. What about your willingness if these circumstances get worse to increase this program?

TRICHET: I will only say that we have designed the program since the very beginning - and I said that since the very beginning - as helping us to restore a more normal functioning of our transmission mechanism of our monetary policy. And this is, of course, a matter of judgment. The governing council is the judge to see how to help restoring a better transmission of our monetary policy.

It’s not quantitative easing. We are withdrawing all the liquidity that we are injecting, as you know. Thank you very much. Sir?

QUESTION: (Inaudible). Mr. Trichet, I’d like to ask you if the governing council today has discussed the very high level of spreads in Italy and Spain with regard to the SMP program, of course. Thank you.

TRICHET: We have examined, as I said in the introductory remarks, of course, all the situation as is under our eyes. And I mentioned myself that there were tensions. I will not make any other comments on that.

It is, of course, overall observation that we have done. And that explains why in particular we have decided that we would maintain the full allotment of one week, one month, and three months supply of liquidity. Thank you very much, indeed.

QUESTION: Why have the bond purchases stayed at relatively low levels despite sovereign debt market turmoil? And do you think that the ECB could buy large amounts of bonds when Ireland gets its aid package in the same way as it did when - after the Greek crisis in May?

And my second question is you said that you expect governments to do what they should. Do you think that Eurozone governments have the capacity to respond to the crisis?

TRICHET: On your first question, I would say that you know that we publish what we do every week. So I would ask you to look at what we are publishing. On the second question, I - and we all expect that the governments would follow what they are committed to. And all have their own medium term adjustment and stabilization program.

We expect, as you know, very, very strongly that we would improve governments. And I don’t want to tell you again how attached we were for strictly applying, implementing the stability and growth pact, fighting as we did in 2004 and 2005 for the stability and growth pact to be preserved and not to be weakened.

And we did that in - I have to say - quite a fierce relationship with the major countries in Europe, to be clear, because they wanted to weaken that at the time. We expressed our grave concerns in 2005. And we are on record for that.

And more recently, we are calling for (inaudible), enforcing sanctions, and reinforcing - I would say - very substantially I was asking for quantum leap on behalf of the governing council in order for both the stability and growth pact, which is varying fiscal policies, and the macro policies surveillance.

The surveillance of competitive indicators, the surveillance of rebalances to be equally considerably reinforced, to be clear, to be legally created and set up, and then, of course, to be as strong as possible. Thank you very much for your question.

EMMA MCNAMARA, RTE NEWS: Emma McNamara from RTE News in Dublin. Mr. Trichet, why do you think that the support package for Ireland hasn’t had the desired effect on the sovereign markets for debt for Ireland and other peripheral nations? And what will - what’s needed to restore confidence there?

TRICHET: It is always a matter of regaining confidence progressively. So it is up to the responsible authorities. And I’m sure that they will do that to readdress progressively. I never saw, personally, sharp and abrupt changes in the attitude of the investors and savers. They have to be progressively convinced. So I am confident in the fact that the authorities that are in charge will progressively convince the observers, savers, and market participants.

QUESTION: Is the level of disruption of the transmission mechanism on the higher level than one month ago?

TRICHET: Again, it is a question that we are permanently looking at. I was quite strong in telling you a moment ago that we judged that it was appropriate today to maintain the full allotment fixed rate that had been envisaged to be changed. And we had envisaged that it could be - it could be back to - I would say - tenders.

So this is a matter of judgment for you. But it seems to me that it means that we judge the situation not exactly as we would have considered if we would have gone back to this tenders. Thank you very much, sir. Yes?

BRIAN BLACKSTONE, WALL STREET JOURNAL: Brian Blackstone with the Wall Street Journal. In the opening statement, you mentioned inflation - risk to the inflation outlook - as being broadly balanced. I think in the past you’ve said slightly tilted to the upside. Is there a change in your assessment about inflation? And what are some of the reasons for that change?

And also, I have a technical question on the balance sheet for the Central Bank of Ireland. There’s been an increase in other assets, which could be some types of emergency lending. Are national central banks able to make emergency loans available outside the normal ECB financing operations? Is this something that the ECB discusses or votes on? Thank you.

TRICHET: Well first of all, on your second point, we have doctrine for ELA - emergency lending assistance. And I have nothing to add to that, which is an ongoing concept.

As regards your first question, it is true that we consider that the risks are broadly balanced when we look at the medium term risks for price stability. It is overall taking into account all the risks on the upside and the risk on the downside, also taking into account, perhaps, as you have seen, that we consider the risk for the real economy to be slightly tilted on the downside. So that is something which we had to take into consideration.

I say that, but it’s also for me - your question is interesting, because I have also to mention, as you could see today, that since the start of the recovery, which started in the third quarter of last year - of 2009 - we have been constantly surprised on the upside, if I may, by what we were observing.

So we have revised upward our projections. And the results, when we had the results, were a little bit better or substantially better than what we were expecting, and what the international institutions were expecting.

I mention that because we are losing perhaps from time to time the sense of what’s going on in the real economy. In the real economy, things are growing constantly. And today, I have said finally we narrowed, as you have seen, the ranges. We have also considered that growth in 2010 would be 0.1 percent higher than we thought three months ago.

It’s not much, but nevertheless, it’s been constant since the third quarter of last year. Constant increase, if I may, in the new projections in comparison with the previous projections.

And this is no time for complacency. And I would not say that we have full satisfaction as regards the real economy, of course. But nevertheless, I think it is something which is interesting to note. And I would say that not all economies are surprising on the upward - when you look at the real economy - in particular, in the advanced economy.

Thank you very much, indeed. I don’t want to - now want to go over there - but I don’t see any hand there. So please, perhaps - please, ma’am?

FRANCINE LACQUA, BLOOMBERG TV: Mr. Trichet, Francine Lacqua from Bloomberg TV. The markets were really expecting some kind of bazooka announcement today, which they didn’t get. Are the markets getting ahead of themselves, or was it misinterpretation?

TRICHET: I mean - again, I think that today I’ve said a number of things. And I don’t want to repeat the five points that I made in responding to one of the first questions.

I think every observer can see what we have decided, what are our intentions, on which mode we are, on which alertness we are. And I think that this is what I can reveal, as clearly as possible, of the governing council position.

We will remain alert permanently. And that is, of course, something which has always been in our doctrine. Credible alertness, as I call it, means credible alertness as regards standard measures, and credible alertness as regards non-standard measures. Thank you very much, indeed. Please? No?

QUESTION: Mr. Trichet, would you say that right now that there are many speculators in the market in market for bonds? Who is driving the prices of the bonds?

TRICHET: I never comment myself, as you know, on the market behavior in real time and so forth. Everybody knows, of course, that you have, on the market, those who are long and those who are short. And that’s the way the market is functioning.

I would say - I said there was - I’m not speaking of the markets on a real time basis, a day to day basis. Let’s look at the situation on a longer term basis.

All countries in Europe are pursuing fiscal stabilization program and adjustment without any exception. (Inaudible) under consolidated basis, is this year and next year in a much better shape than the other big advanced economy as regards public finance deficits. That might surprise some observers. Perhaps it is not exactly the way they are looking at it.

But let me give you the figure. This year, consolidated fiscal deficit in the euro area, 6.3 percent of the GDP. According to the present estimates, 11.3 percent in the U.S., 9.6 percent in Japan. Next year, euro area estimate - again, we call of course all governments to stick to their commitment. Next year, 4.6 percent as a proportion of GDP, consolidated deficit of public finance in Europe. U.S., 8.9 percent, Japan, 8.9 percent.

I could quote other big advanced economies that are in this category, if I may. So, I draw your attention to that. And again, I already said that the real economy in Europe - and it is not the case of all economies - has until now - and I could confirm that today - more surprise on the upside than on the downside.

The last PMI that we had was, as you might have seen, quite encouraging. I don’t want to quote any particular survey that I see here and there. The German citizens in this room know what the last FIFO Institute survey, which is the best since reunification. So only to say that these elements have also to be incorporated in the appreciation of observers, investors, and savers. Thank you very much for your question, ma’am.


TRICHET: You have a credit for one more question, ma’am.

QUESTION: Do you have any indications that the big institutional investors, like hedge funds, have already started to buy less bonds from the BRICcountries?

TRICHET: I will not - certainly not comment on that. But those who are the most lucid will probably see that you’d better incorporate all in your own judgment and appreciation, including what I just said, which is a little bit, in my opinion, underestimated. They have also to incorporate the determination of the European authorities, of the European governments to preserve Europe and the euro area stability. Thank you very much, indeed.

QUESTION: I have a question from Market News International. Mr. Trichet, do you expect gross differentials to widen further next year? And are you concerned about the prospect? And the second question is what effect has the Fed quantitative easing had so far on Europe and the euro? Thank you very much.

TRICHET: On the second point, I will certainly not comment. On the first point, I would say we have, of course, projections for each particular economy. The fact that we have a large - I would say - proportion of the euro area which is now on its way to grow in a significant fashion after having been very flat, if I may, in terms of growth over the last years. It is something which we expect is offsetting the fact that other economies have to adjust.

As you have seen, our projections are suggesting that we are going to growth which is significant over the next years. So all taken into account, there is the offsetting - if I may - that I have mentioned, which is the symmetry of what we have observed in the first years of the euro. Thank you very much, madam. Madam? And then I have some questions over there. But I see that today we have questions.

QUESTION: (Inaudible) in Dublin . Just two very quick questions about our bailout. The first one is, while there seems to have been a lot done on the capital front, markets seem concerned that very little has been done on the liquidity front. Would there have been scope to do more to improve Irish banks liquidity?

And then in terms of Irish banks reliance on European Central Bank funds, does the European Central Bank ultimately want to get Irish banks borrowings back to the level pre-crisis, or do you accept that they will permanently be higher?

TRICHET: I’m not sure I got exactly what you said at the very beginning. I have indicated the decision we took. We think they are commensurate, and as regards the non-standard measures.

As regards the - I have no particular comment on any particular commercial bank. We apply our own supply of liquidity channels. And no comment. No particular comment. Thank you, madam. No? I thought you had -


TRICHET: No, if you don’t want - it’s okay.

QUESTION: I was - I was going to be nice and wait in line. So - but if I can ask another question, that would be great.

I just want to double check something. You said earlier that the original predisposition of the governing council going into this meeting was to go back to tenders and to auction on the three month loans. And that’s been delayed now for the first quarter or into the second quarter.

So I was just wondering, is the predisposition now that you would return to the exit, then, in the second quarter and following on from that you would hope that on the MRO’s you could also proceed with the exit?

TRICHET: We had no predisposition.

QUESTION: But you said you envisaged too that you could return back -

TRICHET: Yes, it was a possibility. We had the possibility either to go back to what would be the normal tenders, or to maintain these non-standard measures, which is to have full - we had no predisposition. We were not pre-committed, neither in one direction or the other. And so we decided as we did. But we were not pre-committed for any of the two options.

See? We had the two possibilities. They were of course obviously open. We decided, as you know now, to maintain this full allotment fixed interest. Thank you very much, indeed, madam. Please?

QUESTION: Yes, (inaudible). The Bank of Portugal pointed to financial risks in his country if the government was not going to consolidate enough. Is the ECB sharing this view? And I didn’t hear anything about possible domino effect within Europe if Portugal is not going to ask for help. Could you please tell me what your -

TRICHET: I would say that for all countries, without exception, it is extremely important to substantiate the decisions that would permit to attain the goals that are the goals for fiscal deficit next year - in 2011. And of course, taking into account what is going on for this year also. But I’m concentrating on next year.

And it is the very, very firm message that we have of all countries, of course, including Portugal, but all countries. And we are in liaison with the commission and with the various administration on that mode.

And of course, I would certainly say that what you have mentioned as regards the Bank of Portugal position is of course a message which is very important, fully in line with the message that we have for all countries, without any exception. Madam?

QUESTION: (Inaudible), Mr. Trichet. Two questions as well. First one, on Tuesday, you said in Brussels in front of the European Parliament that observers should not underestimate the willingness of Europeans and Europe to overcome problems - the current problems. Could you clarify what you mean with this willingness, and why you are so sure that there will be this willingness?

And my second question goes a bit more on the German side. There have been recent surveys - especially one that fully seven percent of Germans want the deutschemark back. How much worried are you on this? And why do you think the Germans - so many Germans are against the euro? Thank you.

TRICHET: Well there are Germans in this room. They can say - and nobody is never challenging that when I say that - that the euro has given the euro area and the Germans and the other fellow citizens that are making of the 330 million fellow citizens, that they had price stability at the level of 1.97 percent. In Germany, it is better. So for the Germans, the price stability since the inception of the euro is around 1.5 percent.

Best result for Germany, and also for all the euro area as a whole since 50 years - 50 years. Best result since 50 years. Frankly speaking, for an institution that was called by the fellow citizens of Europe to have a primary mandate which was price stability, and to deliver price stability, it is something that I would restate.

Let me tell you that I never comment on survey on going back to this or that. Of course, it is my opinion totally, totally out of question. And I trust that if you would ask a question which would try to check whether it is a real question or a fancy question, you would probably see that nobody really thinks that it’s a real question.

I think, again, it is very important that we have this strong institution which is the ECB, the strong institution which is the euro system, that solid governing council, which is delivering and credible in the delivery over the next ten years.

That being said, we need improvement in governance of the E letter in EMU. We have, it seems to me, a good M. And of course I do not - I would say - want to be complacent in any respect. We have to be alert permanently, as I said, stand ready to take the appropriate decision any time without pre-commitments or no complacency at all. But track record is there. The E must be improved. The E must be improved. And I trust that it will be improved.

Now my general remark on the fact that observers should never under-assess the determination of the European in any circumstance is based upon my own experience. When times are very demanding, the European are taking decisions. And when I say the European, I’m not speaking of us, I’m speaking of the executive branches when and where needed, and the Parliament. But that is my own personal experience. Thank you very much, madam. Sir?

QUESTION: Stephen (inaudible). I have a follow up to my colleague who got in the attitude in Germany. I think what most Germans fear is not really inflation. Maybe that’s a fear, but the biggest fear, I think, at the moment, is the Germans are afraid that there will be a transfer union where German taxpayers have to pay for many other countries.

This comes together with economists who used to be in favor of the euro, but are now arguing that it might be - have been a mistake to introduce a monetary union without a fiscal union and without a strong central government. What do you tell these economists and these Germans? Thank you.

TRICHET: Well I appreciate enormously the fact that they trust that we have delivered stability of the prices in a way which is historically impressive. And they don’t forget that it was the mandate of this institution. I hope that nobody forgets - not only in Germany but also in France and also in Italy - that in 2004 and 2005, there was a meeting of minds to destroy the stability and (inaudible).

I’m not sure that - I have to say that in retrospect, I am a little bit surprised that this fight to maintain what is absolutely obvious, of course, a very strong and solid governance of fiscal policies, because we have a single currency, was not supported that much by those who now are saying it doesn’t work very well.

We were on record to say we have great concerns. So we are learning. It’s a learning by doing process. And again, I’m absolutely convinced that we will - and I think that we are ourselves extremely strong on that - improve governance.

Now as you know, it is a matter which is being discussed between the council, the Parliament, and the commission according to the rules of Europe. Thank you very much for your excellent question - and all of them. Sir?

JACK EWING, INTERNATIONAL HERALD TRIBUNE: Jack Ewing from the International Herald Tribune and New York Times.

Going back to what you said about economic growth, although it’s been surprising on the upside, isn’t it also true that there’s been a sharper divergence between countries like Germany that are performing very well and countries like Ireland or whatever that are not performing as well? And does this make it increasingly difficult to fashion a monetary policy that is appropriate for all countries?

And secondly, if I can take another run at the bond purchases question, is there any upper limit to how much money the ECB is prepared to commit to the SMP in order to insure that you’re transmitting monetary policy? Or are you willing to do whatever it takes?

TRICHET: Thank you very much, indeed. On your first question, all very vast continental economy like the euro area, like the U.S., have a level of standard deviation, if I may, between growth of the different state or economy or countries in standard deviation between the (inaudible) cost and the deviation between the inflation and so forth, which is bigger than even standard deviation as regards unemployment, for instance.

In the US, the best state, if my memory is exact, is around 2.5 percent unemployment, and the worst state is 14 percent. So you see, there are big differences. And of course it is very easily expendable because you have specialization that are not the same here and there. So if necessary, you have business cycles that are not necessarily the same, even if they are all correlated.

So I only would mention again what I said. It is extremely fortunate that those part of the euro area economy that have regained competitiveness through hard work as - but it is not only the German economy - but as the German economy - can now be a source of growth. And it is of course to the benefit of the euro area as a whole. It was the reverse before.

So that is the way you would expect things to operate in a very vast continental economy. Again, we are of the size of the United States of America. That was for one of your two questions.

On the SMP, since the very beginning, I never said on behalf of the governing council what was the limit of the problem. So I will - totally in the continuity of the SMP doctrine. Thank you very much, indeed. Sir? I will take two more questions, but time is elapsing.

SIMON CARSWELL: Mr. Trichet, Simon Carswell again from the Irish Times. Just wanted to ask, our central bank governor, Patrick Honohan, who is a member of the governing council, had suggested the alternative to the recapitalization - the further recapitalization of the Irish banks - as a suggestion, he said his preference for a risk insurance scheme, where Europe or the IMF - but he asked Europe as well - whether they would provide a guarantee to the Irish state to cover potential losses in the banks, because the Irish state itself felt that they had covered the losses with the capital that they had provided already.

What, in your view, is - would that be a better option? Or does the European Central Bank need more tools to tackle problems like capital in the banks?

TRICHET: I have to say that we have a program. And I said that the governing council was welcoming in the program. So I will not embark in a discussion on that program. We have a program. Please, ma’am?

QUESTION: (Inaudible). I have two questions, Mr. Trichet. Do you consider that the measures of the Spanish government are sufficient and appropriated? How do you view the reaction of the financial markets regarding Spain? Thank you.

TRICHET: I would make exactly the same response as the response that I made with the question on Portugal. I would say to all countries, without exception, we are telling you should substantiate as - I would say - completely and convincingly as possible all the measures that would permit to attain the goal that have been fixed for next year. And that is not a message particularly for Spain, but for all countries.

And that is absolutely essential, because again, what we have to do is to be totally credible. Governments have to be totally credible. And of course, the euro group as a whole, the collage, and of course, as far as we are concerned, you know how determined we have to be credible.

Thank you very much, madam. Two last - three last - okay. One, two, three. The lady will have the last word. Please?

QUESTION: Martin (inaudible). Just one short question. Last Wednesday, Mr. (inaudible) said that he thinks that you would increase the signing of the EFSF if necessary. Do you share his opinion?

TRICHET: Well, it is a decision which has to be taken by the governments. And we call all authorities to be up to their responsibility, I have to say. And that will be something which is very strong.

Every authority, every institution has to be up to its responsibility. I trust that we will be in contact with - and we are in permanent contact of course with the authorities in question, namely the government - for them to demonstrate as clearly as possible that they are up to their responsibility.

I would also say that - it’s a general remark - we are speaking of various governments of their own creditworthiness. And it appears how extraordinarily important, of course, that the governments have their creditworthiness.

I would say in the first episode of the turbulences, it was very clear that we had a capacity to contain the pressure, because we had the authority of the public authorities. And clearly, what we have to do now - and it’s not a remark only for Europe, it’s a remark for the entire world in the advanced economy - we have to preserve the authority and reinforce and consolidate the authority of the public authorities.

QUESTION: A very quick question. You talk about determination of European authorities, and you included specifically the ECB within that. There are reports, since you’ve been talking, that the ECB has been buying peripheral government Eurozone government bonds in large quantities as you have spoken this afternoon.

Is this maybe - when it comes to determination of authorities - a question of actions speaking louder than words?

TRICHET: I never - I never comment on market observation in real time, Mr. Atkins, as you know. No, I’m sorry. This will be the last question.

QUESTION: (Inaudible) for Market News. I know you’d be very disappointed if you didn’t have a question on the euro, so I have to ask you. The euro has gone from about - a little under 1.43 at the beginning of November, to this week it slipped under 1.30. Is this the kind of move that might be considered brutal?

TRICHET: Excessive volatility is not welcome, as you know. It’s not good for global prosperity, global growth, and for stability at a global level. So I will stick to this remark, which will not surprise you. Thank you very much, indeed.


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