A Quick Summary Of What Jean-Claude Trichet Told Bloomberg TV

Photo: Bloomberg

Courtesy of Bloomberg TV, here’s what Jean-Claude Trichet said live form Davos.(You can watch the video here)


Trichet on if he thinks the markets have gotten ahead of themselves:

“What I already said on behalf of the governing council, we consider our present interest rates are appropriate.  As I said, there is nothing new there. We always take the decision that permits us to deliver price stability.  As you know, we are very proud because after 12 years we have delivered an average yearly inflation of 1.97%.  It is close to 3,2, and that is very important.  It is the best track record in close to 50 years.  It is also something that is very important in terms of credit given to the central bank.  We trust it is a necessary condition for a country during a recovery.”

 On German inflation expectations:

“All 17 countries on the average about 1.97%, which is a track record.  Speaking of facts and figures, I would also say that for Germany in particular, the average inflation has been 1.5% over the same period, because they were working on their own unique economy.”

On the present interest rates:

“The present interest rates are appropriate.  We are never pre-committed. We do what is necessary.  We do not do it by chance, it is because we took the necessary decisions when it was necessary. I would say our credibility is based on that doctrine.”

 Their expectations are based upon what they think it will be based on inflation.  What is much more important and you mentioned it a moment ago, they know that we will deliver and they trust us to deliver, and that is of course something that is extremely important for them.  They trust we will deliver over the medium-term price stability.”

On the concern that some large banks remain shut from the market:

“We are calling all banks to do what you can to recapitalize through various means, be prudent and cautious in regards to your own wages and salaries and packages and so forth.  We’re telling them they have to go to market whenever it is possible and necessary, and we also tell them go to the governments. This is our permanent goal for the banks.”

 On how the situation in Europe has progressed in the last few months:

“If I look at what has been done by a large number of banks, I would say a large number have improved their balance sheet.  I also see when I look at the figures that we have outstanding credit growth, I see we are now in the mode of much more dynamic growth of the credit than before.  And for the non-financials where we were negative, and now we are at zero.  I expect that we will continue to go in the right direction.  I will also mention the fact that since the start of the recovery, namely the third quarter of 2009, we have quarter after quarter been positively surprised, not fantastically, but there have been a number of surprises.  The last figures I have, the survey figures are confirming that we are month after month experiencing that recovery, which started several quarters ago.  So we never claimed victory.  We are always very prudent and cautious.  We have to remain again prudent and cautious, but again, it is good to see the recovery is confirming the success.”

 On if he’d be in favour of implementing a condition where the banks would need to pay a higher interest rate to wean them off cheap money:

“The problem we are looking at is a more general problem.  The banks have to go to the market and if they avoid that they would be addicted, and we also have the important issue, which is for governments to do their job of their own recovery.  Now we have all the countries in Europe with the adjustment program, and we’re calling on all of them to be very, very strict in following what has been decided in what they have fixed in regards to their own target.”

On the EFSF purchase of government bonds:

“They have said on behalf of the governing council that they would call upon the governments to improve the functioning of this position from the quantity and the inequality.  Quality means flexibility and deciding a new doctrine, which would be more flexible.”

“It is complex.  There are a number of tools they can utilise and never enough possibilities.  I would certainly not exclude that one, which I would consider useful in certain circumstances.”

“We have a number of standard measures we have in the past.  This approach to securities is part of the measures, and we do that to help restore a more normal functioning of our monetary policy transition.  It is something that we consider important in some cases to permit that money to the transmission to be correct.  As correct as possible and under the circumstances.”

On the recapitalization of banks:

“The recapitalization of banks is something that as part of practically all the programs that are followed by the various governments and certainly part of the programs that are followed with the help of the European governments and the IMF, so it is part of those programs of course.”

 “Each responsible individual has to be up to the responsibility.  The times are demanding.  They are demanding for all of private sector as well as the public sector.  It is in the case in Japan and the U.S. This crisis is the worst since World War II, could have been the worst since World War I had we not taken very bold decisions, particularly government itself.  This is why we have the problem to gain control of their own finance, but I would say, yes, indeed, all authorities have to be up to their responsibility, and as I say, we are in Europe and we have to review the European functioning as well as Japan and the U.S. has to review their own functioning.  We are responsible for every monetary union.  We have done what was called upon us.  We deliver.  I mentioned the track record.”

 On the wide expectation of some kind of restructuring or default by one of the peripheral countries:

“I would say we have programs in case of this with the judgment of the commission and of the council.  There is both.  There are both judgment of the international community as a whole and judgment of the European Union.  We are calling this country to follow the plan, and we control every quarter very cautiously and attentively the implementation of the plan.  That is what we are doing.”

“We have the progress and limitation of the decisions that are difficult to take and have to be implemented.  I am not surprised to see the facts and the implementation of the plan, but this is decisive.  What is decisive is you do the job.  It is true for all of the economies.  You do the job.”

On if the Euro zone will have more or less members five years from now:

“Those questions have gone on from the very beginning.  We were supposed to only have a handful of members.  Then we started with the 11 members, which is something that has been stuttered as absolutely impossible by a lot of observers.  Then from 11 we came to 17.  Only 12 years afterwards because it was the beginning of this year that Estonia joined us.  It is a process that is going on.  I will have to say those that are betting on the fact that we could not do the job, proven [inaudible] we will see hard work and how many additional members are there.  Those were called to enter because they have signed the treaty, it is very serious.  You have to be sure you meet the requirements and to enter means you are prepared to do that, and I expect, of course, that there will be more members and five years’ time.  Of course.”

 On Trichet’s plans after he steps down from the ECB later this year:

“We will see.  I do not have any plans at the moment.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.

Tagged In