jean - claude trichet : interview with kyodo news, nikkei, nippon hoso kyokai and yomiuri shimbun interview with mr jean - claude trichet, president of the european central bank, by mr shogo akagawa ( nikkei ), mr keiichi hirose ( kyodo news ), mr hiro nakamura ( yomiuri shimbun ) and mr shuji noguchi ( nippon hoso kyokai ), conducted in tokyo on 9 february 2008 and published on 10 and 11 february 2008. * * * how do you assess the discussions at this g7 and the g7 statement? i think it was a very, very good discussion – a very important one too because the discussion took place at the moment where we are experiencing the market correction, which is significant, which is ongoing and from that standpoint i think it was a very, very timely g7 meeting. and very stimulating, very interesting. a very good presidency. so from that standpoint, i am very happy. how should the g7 behave in order to overcome the problems caused by the subprime turmoil? and what are your opinions about financial supervision and regulation and about the transparency and efficiency of the new financial products? first of all i think it is extremely important that we learn all the lessons from the present events, exactly as in the past we drew – in my opinion very wisely – a lot of lessons from the asian crisis. in japan, everybody knows, perhaps even better than in europe, what the asian crisis meant and i think a lot of lessons have been drawn and they are good ones. and now it is exactly the same. we are experiencing a market correction of great amplitude. we have the first stress - test in real magnitude of the new global finance with all the financial innovations and new instruments. therefore it is very important that we draw all the lessons. we have a provisional report that was made by the fsf – the financial stability forum – which was created after the asian crisis, by the g7. and so we know that we have to improve in a large number of areas, they are mentioned in the communique and we will have a definitive report in the occasion of the april meetings of the international community in washington. so it is a work in progress. we have a full agreement in the g7 on the methodology that permits us to draw lessons from the present turbulences and we know already that we will have to

negative productivity growth, high wage growth kept unit labour cost growth elevated, though profit margins are absorbing part of their impact on inflation. the disinflation process is expected to continue, especially once a recovery in productivity growth starts reinforcing downward pressure on labour cost growth. inflation is expected to decline to 2. 3 % in 2024 and reach 2. 0 % around mid - 2025. risks to the inflation outlook are two - sided. upside risks include heightened geopolitical tensions, as well as higher wage growth and more resilient profit margins than anticipated. downside risks include monetary policy dampening demand more than expected, and an unexpected deterioration in the economic environment in the rest of the world. financial stability, euro area banking sector and non - bank financial intermediation 2 / 4 bis - central bankers'speeches the euro area financial system has remained strong, aided by declining inflation. nonfinancial corporations and households have shown resilience and are poised to gain from a forthcoming easing of financing conditions. the outlook remains fragile, however, marked by elevated vulnerabilities stemming from weakening growth prospects, still tight financial conditions and the materialisation of geopolitical risks. as higher financing costs, a move towards hybrid working practices as well as environmental, social and governance requirements are likely to continue posing cyclical and structural challenges, we are closely monitoring developments in euro area real estate markets. euro area banking sector profitability reached its highest level since the global financial crisis but is likely to have peaked, as net interest margins started to decline in the last quarter of 2023. banks are maintaining sizeable liquidity and capital buffers despite considerable reductions in central bank funding and substantial shareholder payouts. specifically, significant banks reported an average liquidity coverage ratio of around 164 % and an aggregate common equity tier 1 ratio of 15. 7 % at the end of 2023. nonperforming loan ratios remain close to historically low levels, although mild signs of deterioration are visible in loans to small and medium - sized enterprises and to the commercial real estate sector. banks'exposures to commercial real estate are contained, at around 5 % of their total assets. the euro area banking sector has proven resilient to tensions in other parts of the world so far, and confidence in it has been supported by strong rules and supervision. looking ahead, it is crucial that all jurisdictions finalise their implementation of basel iii. risks in the non - bank financial intermediation ( nbf