jean - claude trichet : interview with the times interview with mr jean - claude trichet, president of the european central bank, in the times, conducted by mr sam fleming on 13 june 2011 and published on 16 june 2011. * * * the times : there are two camps : one that emphases the benefits of the euro and another group that says look at what happened in greece, portugal and ireland – this shows that the project is fundamentally flawed. why are you in the first camp? jean - claude trichet : all advanced economies are still going through the aftermath of the worst crisis in 60 years. it could even have been the worst crisis since world war i, if central bank and governments had not taken tough and bold decisions. had public authorities not acted, we would not have avoided a major depression. i am absolutely convinced of that. what we are reflecting upon in europe is not that different from the important discussions and reflections that are taking place in the us or japan. were we on a sustainable long term path on the previous business model? it seems to me that no big advanced economy – including the uk – can avoid to embark on a strategic reflection after this global crisis. it is not at all surprising that we in the euro area, as one of the big advanced economies, are reflecting on our business model, on our governance and measures to reinforce our resilience. what is very important is that a bird ’ s eye view of the euro area gives elements that are rather encouraging and which are often not perceived : the euro area as a whole is less indebted and far less in deficit on a yearly basis than the us and japan. our current account is balanced, and our growth has been rather encouraging since the recovery started in the third quarter of 2009. as regards growth and job creation, compared with the us we have more or less the same growth per capita and we created more jobs since 1999. but this is no time for complacency in any respect. the big issue to be addressed is to strengthen our surveillance of economic policies by member states. these economic policies are very important in a single currency area – fiscal policy on one hand and macroeconomic policies, including indicators of imbalances and competitiveness, on the other hand. “ economic union ” has to be improved considerably. that being said, as regards “ monetary union ”, twelve years after the launch of the single currency, i can say that the euro is there, it is credible and

along the pricing chain. 7 domestic producer price inflation for non - food consumer goods is growing at its highest rate since february 2013. producer price inflation in the services sector – where wages represent around 40 % of costs – has also picked up. that said, higher wage growth does not mechanically translate into higher inflation. even if wages continue to rise as we expect, we cannot exclude that structural factors beyond the central bank ’ s control might impede the transmission of wages into consumer prices. for example, more intense competition through globalisation or e - commerce might act to compress margins. at present, we do not see much evidence that such factors have affected inflation in the euro area. what is key is that inflation expectations remain well anchored. here we are seeing some positive signs. for example, the latest ecb survey of professional forecasters ( spf ) shows longer - term inflation expectations stable at 1. 9 %. so, overall, there is growing evidence that broad - based economic growth is beginning to generate positive pricing dynamics. but uncertainty arising from economic developments lingers throughout the various stages of this process. implications for monetary policy so what does this imply for our current monetary policy? we have set out three conditions that must be in place for our net asset purchases to end. we need to see the convergence of inflation towards our aim over the medium term ; we need to have sufficient confidence that this convergence will be realised ; and the inflation path needs to show resilience and be self - sustaining without additional net purchases. assessing these conditions is a forward - looking exercise, because the full effects of monetary policy are felt only after long lags. we have to rely on our projections, the probability distributions surrounding them, and the extent to which they are dependent on our own monetary policy actions. in terms of convergence, the latest projections see headline inflation reaching 1. 7 % in each of the next three years. inflation excluding food and energy – a simple measure of underlying price pressures – is expected to climb to even higher levels over the same horizon. these are the latest in a series of projections which foresee inflation converging to our aim over a policyrelevant medium - term horizon. importantly, over the course of the past year, that convergence 3 / 6 bis central bankers'speeches path has held firm, and the timing of when we expect to attain our objective does not appear to have receded further into the future. our confidence in the inflation path is also rising, on the