Brussels, 10/09/2008 (Agence Europe) - In response to criticism from European Left MEPs during monetary discussions with the European Parliament's economic and monetary affairs committee, Jean-Claude Trichet justified the policy of the European Central Bank he presides: in compliance with his mandate, the first objective of the bank is to fight inflation and reach the medium term price stability target. He believes that this policy has borne fruit, given that the eurozone has created more jobs than in the US since the creation of the single currency. He did, however, indicate that given the shocks experienced by the European economy, inflation rates are and will remain high until 2010, well above a coherent price stability level. This situation prompted the ECB's decision not to change interest rates (EUROPE 9733).
Mr Trichet explained that price stability measures had been taken by the ECB to tackle the crisis shaking up the financial markets. These include the massive injection of liquidity into the inter-banking markets and maintaining a high stake in longer term refinancing operation (3-6 months) to enable banks to develop better management plans. In reply to questions from German MEPs Radwan and Hoppenstedt from the EPP-ED Group on the role that national regulators are expected to play, Mr Trichet called on these authorities to “be constantly on the look-out” and “strengthen information cooperation and exchange”. He said that “what was decided by the Ecofin Council must be put into practice as soon as possible” and added that all the potential of the “Lamfalussy” process, in place for adoption of European legislation in financial services, had not been fully used. Pervenche Berès, the president of the parliamentary committee was quick to point out that “you already said that a year ago. Shouldn't someone take the lead and shake the coconut tree?”
In response to Piia-Noora Kauppi (EPP-ED, Finland), who had asked about a recent decision by the US Treasury to nationalise Freddie Mac and Fannie Mae, two pillars of the US mortgages market, the president of the ECB affirmed: “Central banks should be able to provide exceptional amounts of liquidity in exceptional circumstances”. He added that action by central banks appeared justified when there was a problem of liquidity but this involved a problem of solvency and the government had to intervene with tax payers' money. The ongoing nationalisation operation in the US, the biggest ever carried out, could cost US taxpayers up to $200bn. (M.B./transl.rh)