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

the very beginning. but we think that as far as the corrective arm of the pact is concerned it is important to fully preserve the nominal benchmark of 3 % deficit and the integrity of the excessive deficit procedure. the commission proposes. the council will decide. it was, and it is, our duty to say what we think taking into account the crucial importance of the stability and growth pact for the cohesion of economic and monetary union. in any case, whatever the decision is we will be faithful to our mandate and maintain price stability. [ question ] in this context of low growth and low output, the fact that the population is ageing plays an important role too. is that a factor that the ecb takes into consideration? [ answer ] that is a very important feature. in many euro area countries we are seeing a gradual increase in the less dynamic and less active part of the population, which in general leads to a fall in consumption and investment with the resultant negative effect on the economy. that is another reason why reforms of the health and pension systems and the labour market are crucial. in some countries, specific policies have been adopted to correct this demographic trend. [ question ] of course, low growth in productivity also has an impact on inflation. [ answer ] of course. low growth in productivity means higher unit labour costs. cost - generated inflation tends to rise, and that certainly does not make the ecb's task any easier, given that our job is to maintain price stability within the monetary union. [ question ] on the subject of inflation, the ecb has estimated the euro area's non - inflationary potential growth rate to be between 2. 0 % and 2. 5 %. can you confirm that estimate? [ answer ] the ecb relies in this field also on assessments of market economists ’ consensus and on analyses conducted by other major international organizations. we have noticed that this estimate has been revised downwards recently. if i were to mention a figure today, i would say that a number of estimates are getting closer to 2 % than to 2. 5 %. [ question ] drawing to a conclusion this structural analysis of the european economy's problems, allow me to ask you one more question on the economic climate. what is the ecb's forecast for growth in europe in 2005? is the monetary institute optimistic? [ answer ] we are neither optimistic nor pessimistic. rather we are realistic and humble in front of facts and figures. the ecb