: the euro area countries have set up a rescue fund, the european financial stability facility, soon to be called the european stability mechanism. what do you think of the idea of this fund taking over the government bonds held by the ecb, which are worth €75 billion? your balance sheet would then be clean again. trichet : it goes without saying that the governments will have to redeem their bonds that are on the balance sheet of the eurosystem without any change. of course, being part of the official sector, we will not be participating in the voluntary private sector involvement mentioned on thursday as regards greece. sz : some even say that the ecb is a “ bad bank ”, speaking as if it were goldman sachs, bnp paribas, unicredit or deutsche bank, conducting securities transactions on its own account. trichet : that is clearly absurd. we are the central bank for 17 countries in a single market with a single currency. and our integrity is fundamental and fully protected. sz : critics even say that the ecb and president trichet are against debt restructuring because you have taken too many risks onto your books and would then need to write down losses. trichet : that is ridiculous. the integrity of the ecb and the eurosystem is fundamental and fully guaranteed. sz : mr trichet, you have lived in germany for eight years and so know both the germans and the french very well, nations that were enemies until the end of the second world war. how well do you think these two core euro area countries get on now? trichet : yes, there were wars, but the two neighbours were frequently also friends and lived closely together. charlemagne ruled the germans and the french in one country. three citizens of the small breton town st malo, to which i am closely attached, were, for example, members of the berlin academy under frederick the great! and the two nations know that their friendship is fundamental when it is put to the service of europe as a whole. sz : is this shared history enough, or will there soon need to be noticeably more shared undertakings? trichet : the successes of european unification over the last 60 years have been considerable. what we have today is, after all, what the euro ’ s founding fathers dreamed of. we have to make further progress along this historic path. sz : can your two sons and granddaughters understand this? trichet : my sons are convinced europeans

non - linearities – that is, how their effectiveness might change over time or in different economic conditions. we already have some evidence on substitutability. for example, ecb research finds that without the use of large - scale asset purchases since 2015, our deposit facility rate would have had to fall to around - 2 % to achieve the same path of inflation we observed. this is a level that would probably have triggered “ reversal rate ” dynamics, a situation where a rate cut would become contractionary because it harms the business models of financial intermediaries and disrupts monetary policy transmission. conversely, other instruments have displayed complementarities. think, for example, of our tltros and our negative rate policy. the former have been able to leverage the power of the latter by channelling the stimulative impulse associated with sub - zero rates directly to banks. unlike in a “ reversal rate ” scenario, this promotes credit creation – because banks can borrow at very low interest rates under tltros only on the condition that they lend on – without hurting banks ’ profitability and impairing monetary transmission. the second issue we need to reflect on is interactions between monetary and fiscal policies. when central banks have to use balance sheet policies extensively, there is an inevitable strengthening of the interplay between monetary and fiscal policies. this interaction works both ways. fiscal policy empowers monetary policy by fostering demand, which brightens economic prospects for firms. this encourages them to borrow and allows them to fully benefit from monetary policy stimulus. and monetary policy makes fiscal policy more effective, because when monetary policy is at the lower https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp200930 ~ 169abb1202. en. html 5 / 7 30 / 09 / 2020 the monetary policy strategy review : some preliminary considerations bound – and committed to staying there via forward guidance on rates and asset purchases – fiscal multipliers are higher. indeed, one explanation for the superior inflation performance of the united states relative to the euro area in recent times is that monetary and fiscal policies were more aligned. from 2013 to 2018, fiscal policy in the euro area tightened by around 2. 5 percentage points of gdp, compared with a loosening of around 0. 8 percentage points in the united states. ecb analysis for the euro area finds that, while monetary policy was supporting inflation during this period, it