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ECB Trichet: Never Again To Accept False Budget Figures:Press

January 25, 2010 | "IMarketNews.com"

FRANKFURT (MNI) - The European Central Bank will "never again" tolerate inaccurate fiscal data from would-be eurozone members, ECB President Jean-Claude Trichet said in an interview published over the weekend.

Though not dismissing outright the idea of helping Greece, Trichet also did not appear warm to the idea, and he told Germany's newsweekly Focus that he thought Greece would meet its goal of complying with EU budgetary rules by 2012.

Asked about the possibility that others could adopt the euro by painting a false picture of their domestic fiscal affairs, Trichet said: "Let me be very clear on this. Never again will we accept budget figures that do not reflect the facts. Appropriate auditing must always be possible. As early as next month the European Commission will make proposals that will dramatically improve the relevant framework. This is absolutely critical."

Though conceding the "extremely close" ties binding the members of monetary union, Trichet was not receptive to the idea of lending a Franco-German hand to Greece, asserting that "all countries owe it to their partners in the euro area to behave responsibly and correct their imbalances."

Eurozone member states must get their public finances "fully" in line with the EU Stability and Growth Pact, which, Trichet noted, "Greece has not respected."

Just as Ireland has taken the necessary and difficult steps to comply with the pact, Greece "will do likewise" in order to cut its deficit to 3% of GDP by 2012 as promised, Trichet predicted.

"Absurd hypotheses" such as the possibility of Greece leaving the eurozone do not merit comment, he said, repeating a line from his monthly press conference earlier this month.

"The ECB is and will remain extremely vigilant" with respect to future eurozone candidates, he affirmed.

Trichet reaffirmed his conviction "that the U.S. authorities -- both the central bank and the Treasury -- consider that a strong dollar vis-a-vis the other major floating currencies is in the interests of the United States. Ben Bernanke and Tim Geithner have made this very clear."

Asked whether he believed them, given the benefit to the U.S. from a weak dollar, he replied, "I believe in the sincerity of the people I have just mentioned. They know that a loss of monetary credibility would be damaging."

Each central bank will do as it must in its specific environment and the U.S. Federal Reserve is "no doubt" determined to maintain price stability, Trichet said when asked if the ECB could hike interest rates alone. Central banks' respective responsibilities and environments "do not call for the same decisions at the same point in time," he said.

Trichet noted that despite the current rate of eurozone inflation, "What counts is price stability in the medium term."

On no account would he rest on his laurels, he said, promising the ECB would "continue to remain alert" and adding that "there is never a time for complacency."

Trichet reaffirmed that the ECB's mandate is always to do what medium-term price stability requires. The challenges of ensuring this objective oblige monetary authorities to "stand ready for action at all times" in a position of "credible alertness," Trichet said.

Pressed by his interviewers on the increased threat of inflation, Trichet assured that the ECB would maintain stable prices in line with "the needle in our compass." In this context, he noted the importance of anchored expectations -- "a major asset" of the ECB's that he said helped avoid deflation during the worst of the crisis.

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