jean - claude trichet : interview with l ’ espresso an interview with mr jean - claude trichet, president of the european central bank, conducted by mr claudio lindner, published 15 september 2006. * * * mr trichet, let us begin our examination of europe with the message that the figures are giving us : are we in fact seeing a recovery? as early as the second half of 2005 our diagnosis was that the euro area was experiencing a gradual recovery and approaching the level of its growth potential. this diagnosis has now been confirmed by the very good data for the second quarter of 2006 which allow us to record good – and better than forecast – progress in the first half of this year. however, a word of caution : this does not mean that we are changing our diagnosis for trend growth. when we had a rather disappointing figure for growth in the fourth quarter of last year we said it did not change our sentiment that trend growth was around potential. i would say the same today after those flattering hard figures. we have to view everything from a medium - term perspective. and we should not discount the level of uncertainty that exists in the world today. not least because the united states, by contrast, seems to be experiencing a slowdown. what counts for us right now is the overall economic situation, on a global level, and therefore not just in the united states. the leading economic institutions and private research institutes state that we will probably continue to see a rather dynamic growth rate at a global level. however, you seem to be very concerned with inflation, to the point that many people are betting on a further rate rise before the end of the year, to 3. 5 %. the primary mandate assigned to us is to guarantee price stability, and we have to be credible in order to be able to anchor inflation expectations. this is extremely important not only for our credibility, but also because it enables a favourable level of medium and long term market interest rates to be maintained. i am convinced that this is also the sentiment of the 313 million european citizens ( 315 if we include the slovenians, who will be the next to join the euro area ), who are asking us to safeguard their purchasing power by maintaining price stability. therefore, this is not only what the treaty commands us to do but also what our european fellow citizens are emphatically asking us to do. could inflation trends lead you to adjust rates again? after our last meeting in frankfurt, i said, on behalf

and this seems to be due to overly rigid labour, goods and services and financial markets. structural reforms that would allow the economy to be made more flexible are the primary tools for achieving a leap in productivity. in the united states this was made possible in the mid - 1990s. and, consequently? one should never underestimate the importance of investment in research and development, which are today insufficient both in italy and in the euro area as a whole. you have mentioned structural reforms, which are currently at the heart of the italian political debate on developments in the finance laws. let us begin with the deficit - to – gdp ratio, which is well above the 3 % limit. is the situation in italy a cause for concern for you? our message to italy, as to all euro area countries, is the following : the benefits that higher than expected economic growth is bringing, in particular in terms of higher tax revenues, should be allocated entirely to reducing the public deficit and preventing the growth of debt. that is a kind of recommendation. yes. the position of the governing council is very well known. we are recommending rigorous compliance with the stability and growth pact. and as a general rule we would suggest first that public spending be reduced, and only after as much as possible has been done in this area, that taxes be increased if necessary in order to comply with the stability and growth pact. you know tommaso padoa - schioppa well after having worked with him for so many years here in frankfurt. will he do this to improve italy ’ s accounts? tommaso padoa - schioppa is one of the most experienced persons, not only within italy and europe, but also in the world. he has personal influence, and personal prestige in all fields of money and finance, which i regard as being very important. of course, it is clear that the challenges and risks that he faces are enormous. ” being a minister is not like being a banker, the tasks and responsibilities are quite different. “ tommaso has been a marvellous banker, but he has also held a large number of other responsibilities. these are different tasks, but they both require clear judgement, decision - making ability, strength of character and determination. let me add that i do not forget myself that central bankers, by definition, have a multipartisan responsibility. why? price stability is a common benefit for all citizens, regardless of their political sensitivities and individual preferences. according to