jean - claude trichet : interview with il sole 24 ore english translation of an interview with mr jean - claude trichet, president of the european central bank, frankfurt, 16 march 2005. * * * [ question ] international competition has grown over the past few years. europe's competitors are no longer just the united states and japan. many emerging economies, especially in asia, are now highly competitive. there is a lively debate going on in many circles about europe's economic decline. [ answer ] i believe that europe needs to redouble its efforts to become more competitive. failure to do so would be very costly. the ecb fully subscribes to the substance of the lisbon agenda ( the aim of which is to turn the european union into the most competitive market in the world by 2010 – il sole - 24 ore editor's note ) and to the european commission's wish to press on in this direction, in line with the recent report on the same issue put together by former netherlands prime minister wim kok. a good deal has been done, but we believe that a great deal more can still be done. [ question ] everyone is stressing the need to introduce further structural reforms. [ answer ] the lag that has built up between europe and the united states in terms of productivity growth since the mid - 1990s is partially due to a lack of structural reform. it is not our intention to play down the difficulties in reforming the economy or in persuading society of the need for what are sometimes unpopular measures, but we also know that new reforms will help to boost economic growth, european prosperity and employment. in this sense, the ecb backs governments and all social partners in their efforts to introduce these measures. [ question ] the ecb prefers to look at the euro area as a whole, but not all member countries are in the same situation. some of the larger countries are particularly behind in the race for greater productivity. [ answer ] you are right. the governing council of the ecb has to look at the region as a whole, in the same way as the federal reserve system in the united states looks at the us economy rather than at the economies of massachusetts or california. that said, each individual european economy has its assets and its liabilities. [ question ] in that connection, what are your views on italy? [ answer ] italy has numerous qualities, including a very inventive and creative productive sector and dynamic small and medium - sized enterprises

of sme customers in this country are not getting fair rates for their hedging transactions. this is a serious missed opportunity in my perception and calls for some serious cooperative efforts among the banks to offer finer rates to the sme clients who today feel that what they are faced with is a " rip off ”. you might argue that it has been the age old practice that rates are often way off the normal distribution for smaller transactions. but we can always make a sincere effort to change set thoughts and practices. i would urge some of the participants to put up their hands and take this thought process forward. otc vs. futures 20. before i close, let me flag one issue for brainstorming. the otc forex markets and the currency futures are two different market segments for the same product. both are governed by two different regulatory framework in terms of requirement of underlying, delivery and the extent of position taking by participants. we can no doubt have competing market segments as competition will bring in more efficiency. but, how can the competition be fair when the playing fields are completely asymmetric? this, in my view is an important issue warranting further public debate. but we need to underscore the fact that exchange rate is a critical macro - economic variable particularly for countries having capital controls, perhaps no less sacrosanct than the policy interest rates which are targeted by the central banks, the world over. we also need to bear in mind that excessive overshooting and volatility in such a critical variable can have adverse financial stability implications. i will leave you with the thought that there is a paramount need for aligning these market segments, perhaps with a road map over an acceptable time span. bis central bankers ’ speeches concluding remarks 21. let me now try and summarize what i have discussed. volatility is an unavoidable feature of all financial markets and heightened volatility in the forex market that we witness today is neither unprecedented nor unexpected. all economic agents with currency risk will have to frame a conscious risk management policy to cope with the impact of the volatility on their cost, revenue and profit. even as the reserve bank strives to maintain orderly conditions in the forex market, certain behavioral issues that tend to accentuate volatility have to be understood by all market participants and factored into their response and risk management strategy. i have also flagged the issues of forex inclusion for the sme sector and the need