area. as concerns economic activity, recent data continues to support the broad growth scenario embodied in the december 2005 eurosystem staff projections. this continues to form our working assumption regarding the outlook for growth in the euro area. on the basis of the indicators and survey data, it appears that the tendency in economic activity to strengthen and broaden since the second and third quarters of 2005 has so far been broadly confirmed. i am not speaking of successive indicators and figures which can be volatile, but of the trend. looking ahead, the conditions remain in place for economic growth to continue to materialise around current estimates of potential growth. the external environment is buoyant, providing support for euro area exports. investment is expected to continue to pick up, benefiting from an extended period of very favourable financing conditions, some balance sheet restructuring, and accumulated and ongoing gains in earnings and business efficiency. consumption growth is also expected to strengthen progressively, in line with developments in real disposable income as the labour market situation improves. this broad scenario for economic activity is also confirmed by available forecasts. downside risks to this outlook for economic growth certainly remain and relate, in particular, to external euro area developments, such as high and volatile oil prices and concerns about global imbalances. inflation moderated somewhat over the last months of 2005, although it remains at levels above the 2 % ceiling of the ecb ’ s definition of price stability. over the short term, annual inflation rates may remain elevated, reflecting, in particular, past developments in energy prices and also some base effects. meanwhile, wage dynamics have remained moderate over recent quarters and are assumed to remain so for the time being, reflecting, in particular, global competitive pressure. this scenario for price developments remains surrounded by upside risks, which relate to the possibility of further rises in oil prices, a stronger pass - through of oil prices into consumer price index and additional increases in administered prices and indirect taxes. more fundamentally, upside risks to inflation also relate to potential second - round effects of past increases in inflation on wage and pricesetting behaviour. when looking at current monetary developments, the annual growth rate of m3 remained at elevated levels, even though it moderated further at the end of 2005. this moderation can be explained in part by an apparent resumption of the unwinding of past portfolio shifts, which exerts a dampening effect on headline m3 growth. the underlying rate of monetary expansion remains strong, reflecting the stimulative

policy – at the level of interest rates decided to deliver price stability – which is managed with a view of appeasing the tensions in the money market. folha – but why aren ’ t the financial markets as smooth as they should be after all these guarantees? trichet – this is an important issue, despite the fact that central banks and government authorities have taken very important decisions. the central banks put in place a first line of defence against systemic liquidity threats, and then the governments came with a second line of defence against what i would call systemic solvency threats. at the moment i am speaking, there is a remaining level of tensions that doesn ’ t take fully into account all the decisions that have been taken. folha – does it mean that markets do not trust governments? trichet – no. i think it is a question of time and i have called on commercial banks to speed up the process of fully taking into account the decisions that have already been made. folha – how much can emerging countries like china and brazil help to avoid a worse global crisis? trichet – i think that first of all we should recognize that, for the first time since world war ii, we have seen a solid resilience of the emerging economies, which has been quite impressive at a time when we could see the industrial economies heavily affected. and that is true, since the start of the turbulences, since the beginning of august, last year. during one year we observed that the emerging world was more resilient than the developed world. at the present moment, it is clear that even the emerging economies are affected by what has happened in the industrialized economies, and in particular since mid september. of course, we are in a global economy where we are all interdependent. i myself never spoke of decoupling. so, we are all more or less touched by a phenomenon that comes here or there, but it is wrong to think that any of us could be out of the influence of the others. that doesn ’ t prevent me from thinking that for the global economy to get out of this difficult period we have to count very much on brazil, on mexico, on china, on india, and on all other major emerging economies. that ’ s absolutely clear. the potential for global growth is there. that ’ s not to say that the industrialized world has not to put itself in order and contribute themselves to a steady and sustainable growth. f