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, 3 september 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 leave the key ecb interest rates unchanged. the current rates remain appropriate, taking into account all the information and analyses that have become available since our last meeting on 6 august 2009. in this respect, at today ’ s meeting we also decided that the rate for the twelve - month longer - term refinancing operation to be allotted on 30 september 2009 will be the prevailing rate on the main refinancing operations. this decision, which continues to guarantee liquidity support to the banking system of the euro area for an extended period of time at very favourable conditions, should promote the extension of credit to the euro area economy and, therefore, further underpin its recovery. price developments are expected to remain subdued over the policy - relevant horizon. annual hicp inflation was slightly negative in august according to eurostat ’ s flash estimate. this reflects mainly the base effects of the strong rise in commodity prices in 2008. the return of hicp inflation to moderate positive rates is expected within the coming months. at the same time, the latest information supports our view that there are increasing signs of stabilisation in economic activity in the euro area and elsewhere. this is consistent with the expectation that the significant contraction in economic activity has come to an end and is now followed by a period of stabilisation and very gradual recovery. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. the outcome of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as money and credit expansion continues to decelerate. against this background, we expect price stability to be maintained over the medium term, thereby continuing to support the purchasing power of euro area households. let me now explain our assessment in further detail, starting with the economic analysis. following the strong negative

money and credit expansion continues to decelerate. against this background, we expect price stability to be maintained over the medium term, thereby continuing to support the purchasing power of euro area households. as the transmission of monetary policy works with lags, we expect that our policy action will progressively feed through to the economy in full. hence, with all the measures taken, monetary policy is providing ongoing support for households and corporations. once the macroeconomic environment improves, the governing council will make sure that the measures taken are unwound in a timely fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. by so doing, 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 contributing to financial stability. accordingly, we will continue to monitor very closely all developments over the period ahead. as regards fiscal policies, the latest quarterly euro area data and developments in individual countries confirm a substantial deterioration of fiscal positions in 2009, which is projected to continue in 2010. in finalising their 2010 budgets and medium - term fiscal plans, governments must now substantiate their commitment to ensuring a swift return to sound and sustainable public finances in line with the stability and growth pact. in particular, it is crucial that ambitious and realistic fiscal exit and consolidation strategies, underpinned by concrete structural measures, are put in place. the structural adjustment process should start, in any case, not later than the economic recovery and the consolidation efforts should be stepped up in 2011. structural consolidation efforts will need to exceed significantly the benchmark of 0. 5 % of gdp per annum set in the stability and growth pact. in countries with high deficits and / or debt ratios, the annual structural adjustment should reach at least 1 % of gdp. the focus of the structural measures should lie on the expenditure side, as in most euro area countries tax and social contribution rates are already high. turning to structural policies, it is likely that the financial crisis will affect the growth potential in the euro area. this outlook reinforces the need to strengthen reform efforts to support sustainable growth and employment in the euro area. it requires, in particular, appropriate wage - setting, sufficient labour market flexibility and effective incentives to work. at the same time, policies that enhance competition and innovation are urgently needed to speed up restructuring and investment and to create the business opportunities and productivity gains needed