Brussels, 12/06/2007 (Agence Europe) - The meeting is significant from the formal point of view but is it as significant from the point of view of content and the nature of the exchange? Such was the question put by French Socialist Pervenche Berès on Monday 11 June, as she greeted Jean-Claude Trichet for monetary dialogue with the members of the EP monetary and economic affairs committee of which she is the chairperson. Avoiding the question of exchange rates that MEPs had invited him to tackle by way of introduction, the president of the European Central Bank (ECB) kept firstly to the analysis carried out by the Governing Council during its last meeting, that led to a further rise in interest rates (EUROPE 9440).
Financing conditions being favourable in the eurozone, monetary policy “is still on the accommodative side”, with vigorous credit growth, which points to a future rise in rates, said Trichet. Such a prospect is made more likely by the risks of inflationary surge, mainly if salaries rise to a greater extent than predicted. Mr Trichet therefore told Alexander Radwan (EPP-ED, Germany) that it was necessary to pursue a policy of wage moderation valid for “all countries, all companies and all levels of qualification”, and to take fully into account the still high rate of unemployment in a number of countries. “We must be very, very rational in making changes to any existing frameworks”, he warned.
The question of exchange rates remained on one side as, Mr Trichet said, what he wanted to say could be said very briefly. “I am the president of the ECB, I sign the G7 communiqués that are the summarised expression of the consensus between the main players - government and central banks - in a worldwide system where we have had a floating exchange rate for the past 35 years”, he told Ms Berès, without “being able” to say more than the usual formula used by the G7.
Slightly more effusive when it came to financial stability, the president of the ECB wished to avoid sending out a “bad signal”, which would push financial institutions to take risks. He supported the “strengthening of agreements allowing financial crises to be managed” on the basis of three principles: the flexibility of agreements to follow market movements, consistency between crisis-management frameworks and the primacy of private sector responsibility. “We are very much in favour of cooperation that is as close as possible when there is a solvency problem” but “not in favour of an ex ante agreement on burden-sharing” with taxpayers' money as this would make it more difficult to place responsibility on the private sector. “This kind of arrangement does not exist”, he assured Ieke Van den Burg (PES, NL).
When asked if it were desirable to develop the Lamfalussy framework, Mr Trichet said he definitely wanted more cooperation but prefers to give the current framework a chance, as he believes in it. “We call on all interested parties to cooperate as actively as possible in the current framework”, he added. It is very important for all surveillance authorities to be as active as possible in order to cooperate more closely and unreservedly, as it is not normal that the same directive be applied in the same way everywhere. It is therefore not the moment to envisage a single European authority for controlling financial services, he confirmed to Joseph Muscat (PES, Malta) as we are “far from fully exploiting all the potential of this framework including at level 3” (Ed: cooperation between regulators).
Supporting the recommendations made by the forum on financial stability, Mr Trichet repeated that they wanted to set up an administrative regulation for hedge funds. “We are asking (…) core intermediaries to enhance their own risk management and control of the counterparty risks they embark on”, he said. Calling on one hand for industry to act under its own responsibility, he pointed out, on the other hand, that a response can only be “global”. Mr Trichet went on to add: “We accept everything that this kind of institution has contributed to prosperity” but “we must not be complacent”. (ab)