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

Jean-Claude Trichet, President of the ECB,Vítor Constâncio, Vice-President of the ECB,Frankfurt am Main, 3 March 2011

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, which was also attended by Commissioner Rehn.

Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The information which has become available since our meeting on 3 February 2011 indicates a rise in inflation, largely reflecting higher commodity prices. The economic analysis indicates that risks to the outlook for price developments are on the upside, while the underlying pace of monetary expansion remains moderate. Recent economic data confirm that the underlying momentum of economic activity in the euro area remains positive; however, uncertainty remains elevated. The current very accommodative stance of monetary policy lends considerable support to economic activity. It is essential that the recent rise in inflation does not give rise to broad-based inflationary pressures over the medium term. Strong vigilance is warranted with a view to containing upside risks to price stability. Overall, the Governing Council remains prepared to act in a firm and timely manner to ensure that upside risks to price stability over the medium term do not materialise. The continued firm anchoring of inflation expectations is of the essence.

The Governing Council today also decided to continue conducting its main refinancing operations (MROs) and the special-term refinancing operations with a maturity of one maintenance period 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 2011 on 12 July 2011. Furthermore, the Governing Council decided to conduct the three-month longer-term refinancing operations (LTROs) to be allotted on 27 April, 25 May and 29 June 2011 as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO.

As we have stated before, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are, by construction, temporary in nature. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely.

Let me now explain our assessment in greater detail, starting with the economic analysis. Following the 0.3% quarter-on-quarter increase in euro area real GDP in both the third and the fourth quarter of 2010, recent statistical releases and survey-based evidence continue to confirm the positive underlying momentum of economic activity in the euro area at the beginning of 2011. Looking ahead, euro area exports should continue to be supported by the ongoing recovery in the world economy. At the same time, taking into account the relatively high level of business confidence in the euro area, private sector domestic demand should increasingly contribute to growth, benefiting from the very accommodative monetary policy stance and the measures adopted to improve the functioning of the financial system. However, the recovery in activity is expected to be dampened somewhat by the process of balance sheet adjustment in various sectors.

This assessment is also reflected in the March 2011 ECB staff macroeconomic projections for the euro area, which foresee annual real GDP growth in a range between 1.3% and 2.1% in 2011 and between 0.8% and 2.8% in 2012. Compared with the December 2010 Eurosystem staff macroeconomic projections, the lower ends of these ranges have been shifted upwards, reflecting better prospects for the global economy – and thus for euro area exports – as well as for domestic demand. The March 2011 ECB staff projections are broadly in line with forecasts by international organisations.

In the Governing Council’s assessment, the risks to this economic outlook are broadly balanced in a context of elevated uncertainty. On the one hand, global trade may continue to grow more rapidly than expected, thereby supporting euro area exports. Moreover, strong business confidence could provide more support to domestic economic activity in the euro area than is currently expected. On the other hand, downside risks relate to the ongoing tensions in some segments of the financial markets and their potential spillover to the euro area real economy. Downside risks also relate to further increases in commodity prices, in particular in view of renewed geopolitical tensions, and to protectionist pressures and the possibility of a disorderly correction of global imbalances.

With regard to price developments, euro area annual HICP inflation was 2.4% in February 2011, according to Eurostat’s flash estimate, after 2.3% in January. The increase in inflation rates in early 2011 largely reflects higher commodity prices. Pressure stemming from the sharp increases in energy and food prices is also discernible in the earlier stages of the production process. It is paramount that the rise in HICP inflation does not lead to second-round effects and thereby give rise to broad-based inflationary pressures over the medium term. Inflation expectations over the medium to longer term must remain firmly anchored in line with the Governing Council’s aim of maintaining inflation rates below, but close to, 2% over the medium term.

The March 2011 ECB staff macroeconomic projections for the euro area foresee annual HICP inflation in a range between 2.0% and 2.6% for 2011 and between 1.0% and 2.4% for 2012. In comparison with the December 2010 Eurosystem staff macroeconomic projections, the ranges for HICP inflation have been shifted upwards. This is mainly due to the considerable rise in energy and food prices. It should be stressed that the projections are based on commodity price futures as of mid-February 2011, and therefore do not take into account the most recent oil price increases. Moreover, it needs to be emphasised that the projections assume continued moderate domestic wage and price-setting behaviour.

Risks to the medium-term outlook for price developments are on the upside. They relate, in particular, to higher than assumed increases in energy and non-energy commodity prices. Furthermore, increases in indirect taxes and administered prices may be greater than currently assumed, owing to the need for fiscal consolidation in the coming years. Finally, risks also relate to stronger than expected domestic price pressures in the context of the ongoing recovery in activity. Price and wage setters’ behaviour should not lead to broadly based second-round effects stemming from higher commodity prices.

Turning to the monetary analysis, the annual growth rate of M3 declined to 1.5% in January 2011, from 1.7% in December 2010, while the annual growth rate of loans to the private sector increased to 2.4% in January, from 1.9% in December. Looking beyond the movements in individual months and the effects of special factors, trends in broad money and loan growth confirm the assessment that the underlying pace of monetary expansion is still moderate and that inflationary pressures over the medium to longer term should remain contained. At the same time, the low level of money and credit growth has thus far led to only a partial unwinding of the large amounts of monetary liquidity accumulated in the economy prior to the period of financial tensions. This liquidity may facilitate the accommodation of price pressures currently emerging in commodity markets as a result of strong economic growth and ample liquidity at the global level.

Looking at M3 components, annual M1 growth moderated further to stand at 3.2% in January 2011, reflecting the prevailing low remuneration of overnight deposits. At the same time, the yield curve steepened somewhat further at the start of the year, implying that the attractiveness of short-term instruments included in M3 continues to decline compared with more highly remunerated longer-term instruments outside M3.

On the counterpart side, the rise in the annual growth rate of bank loans to the private sector in January was due to stronger lending to both households and non-financial corporations. The growth of loans to non-financial corporations turned positive, to stand at 0.4% in January, after -0.2% in December, while the growth of loans to households strengthened further to 3.1%, from 2.9% in December. Overall, lending to the non-financial private sector has gradually strengthened over the past few quarters, as the economic recovery gathered momentum.

The latest data also confirm that banks have continued to expand their lending to the euro area economy, while at the same time keeping the overall size of their balance sheets broadly unchanged. It is important that banks continue to expand the provision of credit to the private sector, in an environment of increasing demand. To address this challenge, where necessary, it is essential for banks to retain earnings, to turn to the market to strengthen further their capital bases or to take full advantage of government support measures for recapitalisation. In particular, banks that currently have limited access to market financing urgently need to increase their capital and their efficiency.

To sum up, the Governing Council decided to leave the key ECB interest rates unchanged. The information which has become available since our meeting on 3 February 2011 indicates a rise in inflation, largely reflecting higher commodity prices. The economic analysis indicates that risks to the outlook for price developments are on the upside, while the cross-check with the monetary analysis indicates that the underlying pace of monetary expansion remains moderate. Recent economic data confirm that the underlying momentum of economic activity in the euro area remains positive; however, uncertainty remains elevated. The current very accommodative stance of monetary policy lends considerable support to economic activity. It is essential that the recent rise in inflation does not give rise to broad-based inflationary pressures over the medium term. Strong vigilance is warranted with a view to containing upside risks to price stability. Overall, the Governing Council remains prepared to act in a firm and timely manner to ensure that upside risks to price stability over the medium term do not materialise. The continued firm anchoring of inflation expectations is of the essence.

Turning to fiscal policies, all governments need to fully implement their fiscal consolidation plans in 2011. Where necessary, additional corrective measures must be implemented swiftly to ensure progress in achieving fiscal sustainability. Beyond 2011, countries need to specify ambitious and concrete policy measures in their multi-year adjustment programmes, so as to underpin the credibility of their fiscal consolidation targets of ensuring a rapid correction of excessive deficits and returning to a close-to-balance or surplus position. Strengthening confidence in the sustainability of public finances is key, as this will reduce interest rate risk premia and improve the conditions for sound and sustainable growth.

At the same time, it is crucial that substantial and far-reaching structural reforms be implemented in the euro area to strengthen its growth potential, competitiveness and flexibility. In the case of product markets, policies that enhance competition and innovation should, in particular, be further pursued. On the labour market, the priority must be to enhance wage flexibility and incentives to work, and to remove labour market rigidities.

The current sovereign debt crisis in the euro area has reinforced the need for an ambitious reform of the economic governance framework of the euro area. The Governing Council of the ECB is of the view that the legislative proposals which have been put forward by the European Commission go some way to improving economic and budgetary surveillance in the euro area. However, they fall short of the necessary quantum leap in the surveillance of the euro area which is necessary to ensure the smooth functioning of Economic and Monetary Union. As outlined in the ECB’s opinion of 17 February 2011 on these proposals, more stringent requirements, more automaticity in the procedures and a clearer focus on the most vulnerable countries with losses in competitiveness are required to ensure that the new framework will indeed be effective in the long run.

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
 Vítor Constâncio, Vice-President of the ECB

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Question: In your statement just now you did not include the word “appropriate”. Can we assume from that that you consider the current rate to be inappropriate, and was the Governing Council unanimous in keeping rates where they were today?

And my second question is: Was the decision to leave the three-months tender at full allotment motivated by continued concerns about addicted banks?

Trichet: On your first point, the interest rate decision today was unanimous. We mentioned that we are being very vigilant and my understanding of the position of the Governing Council – fully in line with assessments made in the past - is that an increase in interest rates at the next meeting is possible. As you know, we never pre-commit ourselves. Our decision will - as always - be taken by the Governing Council and will depend on any new information and data we receive. So, it is not certain but it is possible.

On your second question: as you know, we have a principle of separation between the standard measures and the non-standard measures. This principle has been reiterated many times and I have been very clear on that. We considered that the decision on non-standard measures was commensurate with our judgement on the functioning of the financial market and of some segments of the market. We therefore decided to maintain the fixed-rate full allotment procedure, including for the three-month supply of liquidity.

Question: You have just mentioned that an interest rate rise next month is possible. Could you perhaps suggest how large that interest rate rise could be?

And secondly, is it possible that this is the start of something which you expect to continue in the coming months and for the rest of the year perhaps?

Trichet: Let me be very clear. Given my own understanding of the attitude of the Governing Council, we have expressed our judgement as clearly as possible. It means what I have just said. I would certainly not embark on anything more and it is certainly not a decision on the start of a series of interest rate increases. That would not be a correct interpretation. We had said already in January and February that the balance of risk emerging from the economic analysis could move on the upside. We have judged today that this balance of risk has moved on the upside and that is why we expressed our strong vigilance.

Question: You mentioned in your statement the tension in parts of the financial market. That leads me to the question: If we did not live in this world with financial tensions, would this be the moment to increase interest rates? You have mentioned that you will increase them at the next session but in a world without financial tension everything around us would be signalling that something had to be done. Would you share my view on this?

The second question is: You mentioned the second-round effects. How do you judge the moves by the trade unions, the discussion between companies and the trade unions at the moment? Some contracts have already been concluded. Is this in your view o.k., from what you have already seen?

The third question is: Did the Council discuss the political situation in North Africa and in the oil countries, i.e. what is going on there at the moment? How do you judge the impact of the oil price on price stability?

Trichet: As regards your first question, firstly an interest rate increase at the next meeting is possible, but it is not certain. In any case and as you know, we never pre-commit ourselves. We always take into account new data and new information. The decision will be taken at the next meeting by the Governing Council. This is standard practice. Secondly and as said already we have a separation principle. It seems to me that your question was more or less mixing up two things. Again, we have a clear doctrine. We do what we have to do to deliver price stability in the medium term, using the interest rate tool and our so-called standard measures. The non-standard measures take into account the fact that we have abnormal functioning of various markets or segments of the market. That is the way we operate and you have a clear demonstration today of the separation principle because we are maintaining the non-standard measures as they were in the first quarter and, at the same time, we indicate that we might change the standard measures.

As regards your second question on the trade unions, our message is always that second-round effects should be avoided, when we have a commodities price shock, as we have now. This is the main responsibility of the central bank. Of course, we cannot change today the oil or commodity prices. But clearly we can avoid that moving oil prices are creating inflation in the medium term. That is why we are vigilant and it is again something which we are monitoring extremely closely. Our message for all price-setters, not only for the social partners, is that they have to take into account that we will deliver price stability in the medium term, in the future as we have done for the last twelve years. As you know, the yearly average inflation has been less than 2%, close to 2% for the last twelve years. This message is extremely important. I would add that in a large number of economies in the euro area we have unemployment which remains at a high level, and wage moderation, which takes due account of labour productivity progress but permits unit labour costs to preserve the highest level of competitiveness, is essential to combat unemployment. This is our message!

As regards your third question I would only say that we ourselves mentioned the geo-political situation confronting us all in our overall appreciation, and we have to pay extremely close attention to what is unfolding. I will not say more than that. We are not ourselves responsible for assessing the political aspects of the geo-political situation. We leave that to those who are responsible, namely the executive branches.

Question: You didn’t answer the earlier question about the size of a possible interest rate increase in the next meeting. I know since you became ECB President the ECB has only ever increased by a quarter percentage point. But maybe if you are saying this is not the start of a series of increases there may be more of a case for a bigger, one-off move this time round.

Trichet: I would say it is not the appropriate interpretation in my opinion. But again, it’s a decision of the Governing Council.

Question: What will you say to those euro zone countries, the peripheral countries that are still going through quite considerable economic pain – will an interest rate increase for them next month not only make the economic situation worse for those countries?

My second question was about the line which you have added warning banks that have limited access to market financing to urgently increase their capital and efficiency – is that perhaps a signal that we might see some ECB steps against addicted banks at the next meeting in April?

Trichet: I responded in real time to your first question.

On the second question, again I refer to the separation principle: we are responsible and it is our primary mandate to deliver price stability to 331 million people. This is the size of the euro area. And we have delivered price stability, because it is our primary mandate and also because it is the very strong call from all our fellow citizens. Each time there is a survey or any kind of analysis of public opinion. We observe a very strong call by our fellow citizens that we ensure price stability. I have to say price stability is essential for the poorest of our fellow citizens and for the most vulnerable segment of the population. So again, it’s our primary mandate. With this in mind we take our monetary policy decision as regards the standard measures. Again that is our duty. As regards the non-standard measures, I mentioned already that we have decided not to change them at this stage. On the rest I will only mention that our call to commercial banks is a permanent message that we are delivering. I will not say anything on the timing of possible changes as regards the persistent bidders.

Question: If I understand this correctly you are saying you are not going to tell us when you expect to announce plans about how to deal with dependent banks. Is that correct?

Trichet: If and when we have a plan we will announce it.

Question: I was just kind of curious…Axel Weber was known as the most hawkish member of the Governing Council. With his departure and Weidmann as his successor, do you expect that he will slip into that role as the most hawkish…?

Trichet: No comment, thank you very much.

Question: Just two Irish questions for you. First of all, our Governor was on earlier this week saying the ECB had agreed that there would not be any fire sale of the Irish bank assets. Can we take it from that that the ECB is happy to continue providing these massive levels of liquidity to Irish banks on a kind of medium-term basis?

And then, we have a new government in Ireland, or we will soon have, who are keen to tackle the interest rates payable on the bailout. Would the ECB be supporting that, i.e. a lowering of the interest rates payable by Ireland?

Trichet: On the first question, I would say that there is a plan and this plan has been approved by the IMF, by the European authorities, after due analysis by the Commission in liaison with us. We are calling for the plan to be applied. And that is something which we believe is absolutely essential.

On the second point, I would say that this is a question for the executive branches that are delivering the loans in question to discuss. I will not say anything at this stage. It is up to the governments to see exactly what they would like to do or not.

Question: Between now and the next meeting of the ECB’s Governing Council there are two summits, the euro area summit and the EU summit, both of which will deal with euro area governance, and you expressed disappointment with what appears to be the likely outcome of those summits. Is there any correlation between the outcomes and the ambitiousness (or not) of the decisions and the decision of the Governing Council to change interest rates?

And the second question: the Hungarian Government has now introduced plans/legislation to change the status of the Hungarian central bank, to diminish its independence. You have expressed your unhappiness with that. Do you think that the European Commission should launch an infringement procedure against the Hungarian Government because of that legislation?

Trichet: On the first point we expressed very clearly, as you know, and in real time, when we had the first proposals made by the Commission, that we thought it was going in the right direction, as I re-iterated, but that it was not the “quantum leap” that we had judged appropriate to take into account the full lessons of the crisis. The governments had weakened, in their own appreciation of the situation, the first proposal of the Commission. Now the discussion is taking place in the European Parliament. We have a very strong message for the governments and we are giving them and, as you know, we have made public our own judgement, presenting our opinion on the changes in the legislation which are envisaged and which are currently being discussed in Parliament. I would sum up our own understanding by saying that the Commission did not go far enough. The governments have even weakened the position of the Commission. And, we are counting on the Parliament. This is not our decision; it is a decision which is taken by the Parliament and the Council. We are counting very much on the Parliament to help Europe, drawing all the lessons in terms of governance from what are, in our opinion, the main lessons of the crisis in this domain. So, again, we are very clear in our message to all European decision-makers, particularly the Council and the governments. On our website you have our opinion and you have a summary of our opinion in ten points that are the points of particular importance, including in particular automaticity – as much automaticity as possible – in the procedure for excessive deficits and for the sanctions, a judgement on the fiscal and economic situation which is as independent as possible, and so forth. This is essential for us. Again, we are thinking medium and long term, not short term.

On your second question, I would only say that we were unsatisfied with the position which was taken by the Hungarian Government, and we will see exactly what the appropriate step is in order to take into account the new situation. We have already expressed our opinion. So, we will see. It is the responsibility of the Commission. At this stage, we have to study the case and see exactly what the optimum next legal step is. I do not exclude anything, including, the possibility that the Commission could take legal action. But, again, it is not our decision; it is the decision of the Commission.

Question: In the euro area we have economies of very different speeds, for example Germany and Spain. How difficult is it in such a divided environment to achieve price stability?

Trichet: Perhaps we could look at the past. In the past you had very different rates of growth in, for instance, the same countries, the same economies, Spain and Germany. Germany was at that time growing very slowly and had the reputation of being the “sick man of Europe”, which was wrong, but Germany was growing very slowly. And Spain was growing extremely rapidly. We are responsible for delivering price stability at the level of the euro area as a whole, 331 million people, 17 countries, exactly like the Federal Reserve System has to deliver price stability at the level of the United States as a whole, even when North Dakota is growing at a fantastic speed and another state is stagnating. Again, we have to run an entire continent, and, various segments of the continent are in different situations. As you know, the standard deviation of growth between the states of the United States is of the same order of magnitude as the standard deviation of growth of the countries in the euro area.

Question: Mr Trichet, I just have two short questions concerning the euro area enlargement. Given your analysis of, and prognosis for, the rising inflation in Bulgaria, do you believe that the end of 2011 or early 2012 would be a good time for Bulgaria to join ERM II, as suggested by the finance minister of Bulgaria recently, or would that be a bad idea? Is it too optimistic?

And my second question concerns Lithuania. What is your prognosis on the same point?

Trichet: I have to say that we did not examine this situation and I do not have any specific analysis that I can refer to. We always call for extreme prudence in our opinions regarding such decisions in the past and this is what we have always said in the past. But I do not have any other message at this stage.

Question: The introductory statement twice underscores the current “very accommodative stance” of monetary policy. The previous statements just said “accommodative stance”. Without embarking on a discussion of the level of a possible rise, to what extent can you say that the monetary policy remains accommodative with this prospect of interest rates rising?

Trichet: I have nothing else to add, other than to mention that we judge monetary policy to be very accommodative and that we are exercising strong vigilance, which is also in line with the fact that we are not saying that present interest rates are appropriate. Again, the message is a traditional message that we have given from time to time. I do not rule out an interest rate increase at the next meeting. It is not certain. We take our decision when we meet and are never pre-committed. I have said that before and I will say it again.

Question: Why isn’t the recent rise in oil and commodity prices in itself something that would take pressure off inflation, given its dampening effect on economic growth? And you mentioned the United States and the Federal Reserve before: your stance on inflation and you’re signalling that you consider raising interest rates seems at odds with the Federal Reserve, which is facing a similar set of globally set inflationary pressures. Do you worry that the ECB is going to be increasingly isolated in its view among major central banks?

Trichet: We and the Federal Reserve have our own responsibilities, which are very important in both economies, the United States and the euro area. As you have seen, we have always taken our own decisions, taking into account our own responsibility, and at times we were taking decisions that were not necessarily the same. To be frank, they have never been the same. So, what we have done and are doing ourselves is to judge our own situation. You mentioned the fact that increases in oil and commodity prices are not necessarily creating inflation. I would say that you are right if the central bank avoids second round effects. That is the main danger when you have such shocks. And, these shocks have a multiple dimension. But what is extremely important for a central bank is to be sure that everybody understands that the anchoring of inflation expectations remains excellent and that nobody, economic agents or price-setters – not only the social partners, but all price-setters – can make the working assumption that, in the medium run, there would be a permanently high level of inflation. It is always what we have done in the past and will continue to do in the future. Our own track record is there. We are fully in line with what we trust is what our fellow citizens are calling on us to do.

Question: Do you see second-round effects already, and if yes, where do you see them?

Trichet: No. We see that there is a strong need to avoid second-round effects. At the moment we see inflation expectations still solidly anchored. And this is a major asset, in our situation, that we have preserved this solid anchoring of inflation expectations, which is confirmed by all of our analysis.

Question: That would be a pre-emptive hike, then?

Trichet: Well, we will see when the Governing Council meets next month.

Question: Mr Trichet, the euro has been relatively stable. Do you welcome this with regard to lowering imported inflation, and do you expect this to continue?

Trichet: I do not comment on exchange rates, as you know.

Question: You mentioned the importance of weakened banks being recapitalised. Are you concerned that the outgoing Irish government postponed a €10 billion recapitalisation of three major Irish banks?

Secondly, do you have any concerns that the prospect of an interest rate increase will undermine the recovery process in weakened economies such as Ireland and Greece?

Trichet: I have already responded to your second question, our responsibility is to the 331 million people of the euro area. But again, we are separating the standard and non-standard measures. And as regards the non-standard measures, you can see that we have kept the non-standard measures for the second quarter as they were for the first quarter.

As regards your first question on the €10 billion, I would say that, for us, the plan is the plan. And this is in the plan.

Question: I have a question on automaticity. You are stressing the importance of automaticity in the realm of fiscal policy and also in the general monitoring of economic developments, and I was wondering why you seem to be more cautious in applying this principle as regards having private creditors participating in the cost of crisis resolution, where you say you are following the IMF approach, which does not call for the automatic participation of private sector bondholders in any debt restructuring. Why are you against automaticity in this domain?

And my second question is on the separation of standard and non-standard measures, which you say is an important principle at the ECB. You can not uphold this separation only to a certain extent. If you flood markets with money, of course it will affect money market rates, and even if you increase your interest rates, you might still have an effect from non-standard operations. So the question is: to what extent is it really possible to separate the two areas?

Trichet: Let me answer the second question first. As already said we have a strong separation principle. The non-standard measures have to be commensurate with what we are observing on the market, namely to help the transmission of our monetary policy to function better again. So, they have to be commensurate. If we were flooding the market with liquidity, we would not be observing what we are seeing for M1, M2 and M3. This is absolutely clear. And again, the standard measures are there to deliver price stability in the medium term.

On your first question, I must confess that I am amazed by the question itself. What we are saying when we speak of “automaticity” is, in particular, that the excessive deficit procedure should start as automatically as possible in order to avoid interference, with all the considerations involved, which has proved in the past to be extremely counterproductive. And again, I don’t want to tell you how disappointed we were by the attitude of governments in 2004 and 2005 and the extent to which we expressed our grave concern at the time and the extent to which we have been vindicated in our judgement at the time by what has happened since then. We are in exactly the same position; we fear that with the reasoning being too short-term, we will miss out on what is necessary in the longer term. It is a work in progress. It is being examined at the level of the European Parliament. As I have said, we are also counting on the Parliament to send this message to national governments. Automaticity as regards private sector involvement is absolutely counterproductive. We have a global doctrine in this regard. If the Europeans were inventing a doctrine for Europe which put Europe in a vulnerable position by comparison with the rest of the world, this would be a very bad move. By the way, this has been avoided, because the doctrine adopted by European governments – which has been made public – sticks to the global doctrine, the IMF doctrine.

Question: Mr. Trichet, you mentioned that Commissioner Rehn was here today. Did he try to have any influence on your decision and if so, was he successful?

And the second question is: in recent weeks there have been some differences between the ECB and the Deutsche Bundesbank. The ECB said it would support the EFSF if it were to buy government bonds, while the Bundesbank was strictly opposed to this. How many national central banks in the Eurosystem support your view and how many support that of the Bundesbank? And did you discuss this issue?

Trichet: As regards your second question, there is only one ECB and one Governing Council of the ECB, full stop. That being said, by definition, I hold to the position of the ECB and to the position of the Governing Council, and that position is “kristallklar”. You can check yourself, but to my knowledge, no other central bank has said that it is against the position adopted by the Governing Council – but this has to be checked, of course. You are better informed than I am.

As regards your first question Commissioner Rehn is invited, as you know, to all our meetings and we are very happy when he is there. Jean-Claude Juncker is also invited to all our meetings. They attend the meetings of the Governing Council as I do attend the meetings of the Eurogroup, and, when invited, the meetings of the European Council. We are fiercely independent as everybody knows. So, the response to your question is: there is no change in the relationship that we have with the Commission or with the governments.

Question: With the cost of money set to rise, it will probably be increasingly difficult for Portugal because they still have to refinance €16 billion by the end of the year and €9 billion by June, if I am correct. Do you have a recommendation for this country? It would be an exception because you generally do not give recommendations to one country. Even Mr Mirow of the EBRD said that Portugal may slip under the umbrella of the European Union and of the Eurogroup. What would you recommend in order to avoid possible contagion?

Trichet: Our message is the same for all countries and it is clear: be ahead of the curve when dealing with your macro policies, with your fiscal policies and with your structural reforms. The message is the same for all countries and particularly for those countries which are in a situation of tension. To sum up our message, it is that you have to put yourself in the best possible situation because everything relies upon the governments themselves. The issues we are speaking about are associated with the signature of governments themselves and so governments should do their own job as well as possible, apply and implement fully what they are committed to do and be ahead of the curve. It is a message for governments collectively, which brings us back to what we have already said about governments, both individually and collectively.

Question: Mr Trichet, the increase in commodity prices and food prices were, if not the cause, certainly a trigger for the revolts in North Africa. Since this phenomenon is expanding, do you not think that it is sending the wrong signal if the President of the ECB says he cannot do anything to stop the increase in commodity prices? Allow me to say that you underestimate your power. For sure, there are a lot of things you can do. You know why the gentlemen in various institutions are placing large bets on commodities and you could do a whole series of things publicly and privately to discourage them. And since you are a strong supporter of governments, there are a few rules which could be implemented to regulate commodity markets and I am sure that if you raise your voice – you did it once in May last year and you got what you wanted – you could have an influence. So why do you not raise your voice again?

Trichet: Thank you for your assessment of the influence of the central bank. I appreciate it enormously. I do not deny that we might have influence when we meet in the various “Gs”, including in the G20 and in the international meetings. The stakes are enormous and inflation at a global level – not only at the level of the euro area – as well as the stability and prosperity of the global economy depend very much on these prices being appropriate. But one should never over-assess one’s own influence. Again, I do not deny that we exist as an international partner and we have a lot of communication channels, including in the central bank constituency.

Question: You declared the problem of persistent bidders an essential one. I just wonder how you will solve the dilemma of maintaining the full allotment procedure in the three-month LTROs, which at the same time of course maintains the problem of persistent bidders. So how are you going to solve this dilemma because we have banks just sitting in the wheelchair, so how do you give them incentives to get out of it in the medium term?

The second question, in this context as well, is: could you please elaborate a bit more on the emergency lending assistance that a few central banks are still using and using it to certain or growing degree? What is, in your view, the purpose of the Emergency Lending Assistance (ELA) and how could it be constrained or contained in a certain way?

Trichet: I already said as regards the persistent bidders, when we have a decision we will make it public.

On ELA, again, we have a concept, we have a doctrine, and we apply this doctrine. We are obviously in circumstances that are exceptional, which are a consequence of the crisis that unfolded in 2007 and 2008.

Question: In the past ten days we have seen an extended use of the marginal lending facility of the ECB. Your colleague Mr Jürgen Stark said some Irish banks were making use of these funds and now the use has dropped off. I wonder if any other banks will make requests to use these special funds in the future.

Trichet: We will see what happens in the future. As regards the past, I think that there has been some communication on this also in Ireland, because it was associated with a transfer between two institutions.

Question: Yesterday rating agencies announced that banks in Cyprus had been downgraded by two notches, right after they had improved their fundamental indicators, such as their regulatory capital. The rating agencies have cited fiscal problems as the reason. Would you be worried that this is the beginning of a new phenomenon in which banks are downgraded explicitly because of fiscal problems and their failure to proceed with structural reforms?

Trichet: I have no particular comment on that. This information was not examined by the Governing Council and I would certainly not draw any general conclusions from it.