European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank and Mr Lucas Papademos, Vice-President of the European Central Bank, Frankfurt am Main, 7 May 2009. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to today’s press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by Commissioner Almunia. On the basis of its regular economic and monetary analyses, the Governing Council decided to reduce the interest rate on the main refinancing operations of the Eurosystem by a further 25 basis points and the rate on the marginal lending facility by 50 basis points, to 1.00% and 1.75% respectively. The interest rate on the deposit facility will remain unchanged at 0.25%. This decision brings the total reduction in the interest rate on the main refinancing operations of the Eurosystem since 8 October 2008 to 325 basis points. Current key ECB interest rates are appropriate taking into account all available information and analysis. In addition to the reductions in interest rates, the Governing Council decided today to proceed with its enhanced credit support approach. In continuity and consistency with the operations we have undertaken since October 2008, and in recognition of the central role played by the banking system in financing the euro area economy, we will conduct liquidity-providing longer-term refinancing operations with a maturity of 12 months.

This in turn has led to sharp declines in rates for such loans to households and nonfinancial corporations. As the transmission of monetary policy works with lags, our policy action will progressively feed through to the economy in full. Hence, with all the measures taken, monetary policy has provided ongoing support for households and corporations. The Governing Council will ensure that, once the macroeconomic environment improves, the measures taken can be quickly unwound and the liquidity provided absorbed so that any threat to price stability over the medium to longer term can be effectively countered in a timely fashion. Indeed, as has been stressed many times, the Governing Council will continue to ensure a firm anchoring of medium-term inflation expectations. Such anchoring is indispensable to supporting sustainable growth and employment and contributes to financial stability. Accordingly, we will continue to monitor very closely all developments over the period ahead. Regarding fiscal policies, the latest projections for euro area countries point to continued revisions to budget balance estimates and forecasts. Higher budget deficits and the fiscal impact of financial sector support measures will lead to significantly higher government debtto-GDP ratios. In addition, updated projections by the Economic Policy Committee of the EU show that most countries face a challenging task in dealing with the budgetary costs of an ageing population. Therefore, it is paramount that countries make a strong and credible commitment to a path of consolidation in order to return to sound fiscal positions, respecting fully the provisions of the Stability and Growth Pact.