unlimited loans to banks? trichet : it is our doctrine since the beginning of the turbulence that interest rates on the one hand and non - standard measures on the other hand are decoupled. we design the monetary policy stance ; we decide interest rates to deliver price stability in the medium term. non - standard measures are there to help restoring a better functioning of monetary policy transmission. we are disconnecting both measures. we can move interest rates on the one hand, and we can move non - standard measures on the other hand independently. wsj : euro member states are working on comprehensive measures to address the debt crisis. what elements should be in that package? trichet : these decisions are the responsibility of governments. we have in particular a very strong message, which is that we need a “ quantum leap ” in the strengthening of governance of economic and fiscal policies. wsj : when you spoke of a quantum leap last year, you referred to quasi - automatic sanctions on excessive deficits. governments so far haven ’ t come along. what makes you optimistic that you can still get your point of view adopted by governments? trichet : there are a number of elements that are important : the reinforcement of sanctions ; the reinforcement of the independent diagnosis that would be made by commission. it ’ s a set of quantum leaps, including the quasi - automaticity of the start of the corrective procedures and of the sanctions, which in our view is extremely important. governance is now discussed by the european council and the european parliament. the parliament has in the past always demonstrated a remarkable capacity to capture what is essential for europe. so, the involvement of the parliament is very important. wsj : last year, governments made a watery compromise on sanctions, weaker than the european commission ’ s proposals. should governments rethink that compromise? trichet : even the initial proposals from the commission seemed to us too timid. our position has not changed. wsj : you have called for maximum flexibility for the european financial stability facility. there is discussion whether efsf should take over all or part of the bond buying program from the ecb. if that were to happen, would you be relieved? bis central bankers ’ speeches trichet : as i said, they have to improve the stabilization fund in both quality and quantity. by quality i mean having a tool that is as flexible as possible. wsj : you have said bond purchases are meant to ensure the transmission of monetary policy

january ). you have to place my remarks in the context of the first 12 years of the euro, during which we delivered price stability in line with our definition : less than 2 %, close to 2 %. when you look at the yearly average since the setting up of the euro it is 1. 97 %, better than had been done in any such period of time in the previous 50 years. you don ’ t get this result by chance. we are profoundly attached to our mandate. and that explains the solid the anchoring of our inflation expectations, which we see as one of our major assets because it helps avoiding second round effects when we have oil price increases in particular. clearly, in particular on the side of energy and commodity prices we have a number of developments that we will continue to monitor closely. wsj : tighter monetary policy would have the biggest impact on countries like spain, greece and ireland where private debt is linked to euribor. can you understand why those peripheral countries are concerned about this hawkish shift? bis central bankers ’ speeches trichet : i also said in my last press conference that the present interest rates were appropriate. in any case all countries in the euro area have an immense stake in the solid anchoring of inflation expectations because medium and long - term interest rates incorporate future inflation expectations. wsj : inflation is being driven by energy and commodity prices and higher value - added taxes in some countries. is the ecb ’ s focus on headline inflation misplaced? does the fed have it right by focusing more on core inflation? trichet : in the u. s. the fed considers that core inflation is a good predictor for future headline inflation. in our case we consider that core inflation is not necessarily a good predictor for future headline inflation. that being said all central banks, in periods like this where you have inflationary threats that are coming from commodities, have to go through the hump and be very careful that there are no second - round effects. this is what we are doing. wsj : when you hiked rates in 2008 there were signs of those second - round effects. do you see evidence they are starting to take hold in germany or elsewhere? trichet : at this stage, we do not see this. and everybody knows we would not let secondround effects materialize. we will continue to deliver price stability. wsj : could the ecb raise interest rates while still maintaining nonstandard measures including