jean - claude trichet : interview with izvestia interview with mr jean - claude trichet, president of the european central bank, and izvestia, conducted by ms anna kaledina on 11 october 2007. * * * - may i ask you your opinion about the global liquidity crisis? at what stage is it at the current juncture? after the difficulties with northern rock, it seems the american crisis spilled over into europe. is this the case? or are the problems limited to deutsche bank? first let me remind you that the ecb as well as the other central banks had indicated that there was a degree of under - pricing of risks in the global financial system and that financial institutions as well as market participants should prepare for the market correction to be as orderly and smoothly as possible. we are experiencing a significant market correction with episodes of high volatility and turbulence. as far as the ecb is concerned, we have clearly indicated that we will ensure price stability in conformity with our primary objective and determine our monetary policy stance accordingly. once this monetary policy stance is decided, we have the responsibility to pave the way for the proper functioning of the money market. these two responsibilities are clearly separated and this has been well understood by market participants. - to solve the consequences of the subprime turmoil, did the ecb inject more liquidity than the us monetary authorities? why are europe ’ s monetary authorities the main ones to act to get out of a crisis that is first and foremost american? in general, do you have any problems of cooperation with the us fed? each and every central bank has its own responsibilities, within the context of economies that are different, circumstances that are different and challenges that are not alike. the comparison of the volume of refinancing on both sides of the atlantic is not pertinent because in the euro area, in normal times, the needs for refinancing are vastly superior to the needs in the united states. as regards the interventions in the money market i think we did well on both sides of the atlantic. and i am very proud of the capacity the ecb demonstrated in working out a good diagnosis and embarking on decision - making which was expeditious and effective. - doesn ’ t the rise of the euro to unprecedently high levels worry you? what level of the eur / usd bilateral exchange rate would pose a serious threat to the european economy? does the ecb

high - spot of the convergence process. thus, the spread between the highest and lowest inflation rate according to the harmonised consumer price index, which had been 0. 7 percentage point in january 1998, rose to an average of 2 percentage points during 1999 ( between ireland with 2. 5 % and austria with 0. 5 % ). last year, the spread between the average annual inflation rates increased to as much as 3. 5 percentage points ( between ireland with 5. 3 % and france with 1. 8 % ). however, the maximum spread might be said to overstate the differences between inflation rates, inasmuch as it looks only at the two countries with the largest inflation differential. if, instead, one measures divergence by the weighted standard deviation of the inflation rates of the emu countries, one is led to conclude that inflation differentials have remained essentially unchanged since the launch of monetary union, after they had previously diminished substantially during the convergence process. the divergence in growth rates between the individual emu countries continues to be considerable. thus, the expansion of real gdp last year in the three countries with the highest growth rates ( ireland, luxembourg and finland ) averaged 8 %, which was 5 percentage points above the average pace of growth in the three countries with the lowest rates of expansion ( germany, france and italy ). however, this measure of divergence is again somewhat qualified by the observation that it is mainly the growth rates of some smaller countries which diverge rather strongly from the average. on the contrary, the growth rates of the large countries are much closer to one another. 2. the reasons for the divergent trends some of the remaining differences in growth and inflation rates are unquestionably due to differences in the position of individual economies in the business cycle, and hence may presumably be rated as transitory. asynchronous national business cycles may be caused by country - specific shocks. a good example of such a shock is provided by the interest - rate - convergence process in the run - up to monetary union. the convergence prior to the launch of monetary union contributed to divergences afterwards. whereas the interest - rate level hardly changed at all in the low - interest - rate countries germany, austria and the netherlands, in countries such as ireland, portugal and spain interest - rate convergence implied a considerable relaxation of monetary conditions. hence the interest - rate - convergence process exerted the impact of an asymmetrical demand shock, whose effect was reinforced by the