jean - claude trichet : interview in bild interview with mr jean - claude trichet, president of the european central bank, in bild, germany, conducted by mr oliver santen and published on 15 january 2011. * * * mr trichet, in one word, how would you describe the state of the euro today? if you allow me two words : credible and stable. will the euro crisis get worse this year? let me be very clear : this is not a crisis of the euro. rather, what we have is a crisis related to the public finances of a number of euro area countries. all governments have to put their finances in order, and above all those governments and countries which have lived well beyond their means in the past. how are the euro area countries ever to reduce the debt, now totalling €7 trillion? this year, the budget deficit in the euro area will be half as high as that in the united states or japan. virtually all advanced economies face acute fiscal problems. this is something that is often forgotten. that being said, this is no time for any complacency. let me repeat : the ecb expects the governments in the euro area to make enormous efforts to bring down their debt. some countries have to get their debt under control again. can you understand that many germans are afraid of inflation? the germans are right to be fiercely against inflation. inflation hurts in particular the poorest. price stability is a precondition for growth. but the germans and the european citizens do not need to be afraid : we have delivered and we will deliver price stability. inflation in europe rose to 2. 2 % in december, the highest rate for two years. we are always concerned if inflation rises and are following developments very closely. but the figures for december can be accounted for, above all, by rising energy prices. let me say something about the longer - term figures. in the last 12 years the average rate of inflation in the euro area has been 1. 97 %, and in germany only 1. 5 %. those are better figures than at any time in the 50 years before the euro was introduced. in germany, inflation was 2. 2 % in the 1990s, 2. 8 % in the 1980s and even higher in the 1970s. these figures speak for themselves. but why does nearly everybody have the impression that the euro has made life more expensive? that may have been the case ten years ago. i do not believe that this

rules incapable of promoting prudent fiscal policies in times of favourable economic conditions ; second, the absence of a mechanism to prevent and correct macroeconomic imbalances within the eu ; third, insufficient coordination of macro and micro - prudential supervision of financial sectors at the eu level ; and finally, the absence of a crisis management framework to avoid contagion between countries and sectors. in response to these problems, policy - makers have set in motion ambitious reforms to strengthen economic governance at the eu level, and many national governments have committed to ambitious fiscal and structural reforms. all these measures should contribute to addressing the underlying causes of the crisis, thereby also supporting the smooth functioning of emu in the future. but let me first explain, in more detail, the ecb ’ s policy since the start of the current crisis. bis central bankers ’ speeches 3. the ecb ’ s response to the financial and sovereign debt crisis – measures and guiding principles since the intensification of the financial crisis in september 2008, and against the background of rapidly receding inflationary pressures, the ecb has implemented monetary policy measures that are unprecedented in nature and scope. this has included a swift reduction in our key interest rates to historical lows, with the rate on the main refinancing operations now standing at 1 % as compared with 4. 25 % in summer 2008. these steps are often referred to as “ standard ” policy measures, since changes in short - term interest rates are the main tool adopted by the ecb to achieve its price stability objective. however, besides triggering a sharp fall in global economic activity, the crisis severely affected the monetary transmission channels. in particular, central banks around the world were confronted with repeated waves of market turbulence, in which liquidity in overnight and longer - term money markets was sharply falling, in view of heightened uncertainty about counterparty risk between banks. as consequence, the functioning of the interbank market was seriously hampered and the ability of banks to provide credit to the real economy was at risk. these developments severely jeopardised the ecb ’ s ability to affect economic magnitudes and ultimately to contain downside risks to price stability. in response, the ecb embarked on a series of “ non - standard ” measures with the aim of relieving liquidity and funding constraints in the banking sector and mitigating impairments to the monetary policy transmission channels. in particular, they have taken the form of : provision to euro area banks of unlimited liquidity