FRANKFURT (MNI) – The European Central Bank’s non-standard measures
were designed for the effective transmission of monetary policy and were
appropriate given current market conditions, European Central Bank
President Jean-Claude Trichet said on Monday.
“All measures must be commensurate with our primary mandate of
price stablility,” Trichet told lawmakers at the European Parliament.
Regarding growth, Trichet acknowledged that the 1.0% gain in
Eurozone 2Q GDP was “much more flattering than expected” and was in
large part due to strong internal demand. However, the central banker
once again emphasized the need to stay alert.
“We see that we had underestimated the recovery. But we think it
would be inappropriate to declare victory and say that we can now be
sure that we are in a situation where growth is very flattering,”
Trichet said.
“We have to remain cautious,” he added.
Turning to the various measures the central bank has taken, Trichet
stressed that they are “what is appropriate to deliver price stability.
We will continue to take all decisions necessary to deliver price
stability, whatever the new elements that come, at any time.”
Trichet also reiterated the utmost importance of being credible in
the ECB’s delivery of price stability, adding that its credibility had
allowed for the central bank to firmly anchor medium-term inflation
expectations.
“If we didn’t have solid anchoring of expectations we would be in a
much worse situation,” Trichet said.
Addressing a question on whether the high conditions for states
accessing financial assistance through the European Financial Stability
Facility could jeopardize the country in question and its ability to
repay the loan, Trichet emphasized the need to avoid any risk of moral
hazard.
“The fact that the help itself comes at a price, from peers which
are saying that we cannot be in a position to creation moral hazard.
There is a lot of logic in what is done,” Trichet said.
“I cannot tell you that we should act in a totally different
fashion. The fact of moral hazard is something that the council must
look at with great care,” he added.
Trichet reiterated his call on all institutions, including
governments and the Commission, to face up to their responsibilities,
“to have a sense of direction”.
Referring specifically to Greece, the central banker highlighted
that the Mediterranean country was going in the right direction.
“Now, I would say my only message is to implement rigorously what
has been decided, which is well oriented in our opinion,” Trichet said.
“If this is done well, as we trust, and in an effective manner than I
think it will be recognized.”
The ECB head also stated his opposition to taxing financial
transactions, adding that the measures taken by the central bank must be
for the sake of making the sector more resilient.
— Frankfurt Bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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