##graded recently as they are seen as overindebted. how serious negative impacts could this have on the credibility of the monetary union, given that the ecb has no fiscal power? trichet : the most recent forecast of the european commission shows that this year the budget deficit in the euro area countries will reach an average of 4 %, with 7 countries out of the 16 above the 3 % threshold. its important to emphasise that this situation should be temporary and reversed as soon as possible. it should not be forgotten that the rules of the sgp are very important for the cohesion of the euro area. these rules are also underpinned by strong financial and economic principles. governments have to take into account the fact that if their citizens consider that the fiscal policy of their government would not be sustainable in the long term, confidence would drain away. and in such a case, when confidence is lacking, additional public expenditure will not have a positive effect on growth. on the second question, following an episode in which the pricing of risks was, in general, too low, markets now have a tendency to overvalue risks. but it does not affect the euro as a currency. rather, it is clear that the single currency has proved to be an anchor of confidence and stability during this crisis. if you think back to the european currency turbulence and its consequences in 1992 and 1993, you can imagine what consequences the crisis of recent months would have had for the euro area without the euro – both on the interest rate markets and on the exchange markets. china finance : what challenges do the us quantitative easing policy pose for the euro area? what's your assessment on the need for coordination on economic and monetary policies between the major economies in bringing about an early recovery of the global economy? trichet : i believe that all central banks are doing what is necessary for the economic area they are responsible for and responding to the requirements of the specific conditions. i do not see the point in comparing one central bank ’ s actions with the other. as i said before, the ecb ’ s open market operations and collateral framework of today are already in a “ nonstandard ” mode and its measures can be interpreted as a way of additional “ non standard risk taking ”. at the same time, we have a very close co - operation with our colleagues on the other side of the atlantic, which proved to be useful precisely in the times we are living. the international meetings, in particular the global

2 % in real gdp growth, on a quarterly basis, according to eurostat's first estimate. available survey data and the monthly indicators for october and november suggest that economic activity has weakened further during the fourth quarter of 2008. looking further ahead, on the basis of our current analysis and assessment, we see global economic weakness and very sluggish domestic demand persisting in the next few quarters. according to the december 2008 eurosystem staff macroeconomic projections for the euro area, a subsequent recovery should then gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and the financial tensions weaken. eurosystem staff project annual real gdp growth of between 0. 8 % and 1. 2 % for 2008, between - 1. 0 % and 0. 0 % for 2009, and between 0. 5 % and 1. 5 % for 2010. these figures represent substantial downward revisions relative to the previous ecb staff projections for 2008 and 2009 published in september. forecasts by international organisations have also been revised downwards and are broadly in line with the december 2008 eurosystem staff projections. in the view of the governing council, the economic outlook remains surrounded by an exceptionally high degree of uncertainty. risks to economic growth lie on the downside. they relate mainly to the potential for a more significant impact on the real economy of the turmoil in financial markets, as well as concerns about protectionist pressures and possible disorderly developments owing to global imbalances. it is crucial that all parties concerned make their contribution to lay sound foundations for a sustainable recovery. for this to materialise as early as possible, it is of the utmost importance to maintain discipline and a medium - term perspective in macroeconomic policymaking. this is the best way to support confidence. the significant measures announced by governments to deal with the financial turmoil should be implemented swiftly so as to help ensure trust in the financial system and to prevent constraints on credit supply to companies and households. with regard to price developments, annual hicp inflation has declined substantially since july. according to eurostat's flash estimate, hicp inflation was 2. 1 % in november, after 3. 2 % in october and 4. 0 % in july. the significant decline in headline inflation since the summer mainly reflects the considerable easing in global commodity prices over the past few months, which more than offsets the impact of the sharp rise in unit labour costs in the first half of this year. looking forward, lower commodity prices and weakening