past, when, even in good periods, insufficient attention was paid to budgetary soundness, and thus a very high price was paid when we were back in a more difficult period in the business cycle. that is the reason why we call for a rigorous implementation of the pact and encourage the european commission in its efforts. 14 ) in the past, you have been quite critical about a lack of compliance with the stability and growth pact. do you think that these fears still arise? answer : we have said very clearly in the past that we would not recommend changing the corrective arm of the pact. after the unanimous decision of the executive branches to agree on a new wording of the pact, we said that “ we call on the commission and the governments to implement it rigorously. 15 ) recently equity markets in many euro area countries have seen their value diminish by around 10 %. how is this phenomenon related to the interest rate hikes? and do you expect this to have an impact on consumer demand? answer : i will not comment on the daily ups and downs of the stock markets. that is like looking at the sea and commenting on the waves and the tide. if you consider the picture in the context of a longer period, then the situation is very different. what we do in the governing council is to ensure price stability in the medium and long term, which is also a prerequisite for financial stability. 16 ) so the influence of future rate hikes might have on equity markets is not a concern at all when you make a decision? answer : price stability is our primary goal as you know and also fosters financial stability. 17 ) in the last stability report the ecb wrote that hedge funds increasingly present a risk to the stability of the economy. can you elaborate on that? answer : hedge funds have expanded considerably rapidly in the most recent period of time. when we look at them from the financial stability standpoint, we think it is important to have a full understanding of the main reasons behind this extraordinarily rapid expansion, and to handle appropriately the risks involved with hedge funds. this handling is operated through the counterparties of the hedge funds, namely banks, which are themselves under the surveillance of the banking authorities. it is through this cautious monitoring by the banks of their risks with hedge funds that we expect them to be disciplined. we have to check permanently whether this channel of introducing discipline in the hedge funds is functioning correctly or not. in this respect,

that is absolutely clear. our working assumption is that there will be an orderly unwinding, because we trust that homework which has to be done will be done. and we call on all partners to be responsible and consistent. 27 ) one specific imbalance is the housing market bubble. do you think that the situation has improved or worsened in the last few months? answer : it is clear that this is a domain in which there is undoubtedly a lot of diversity in the euro area, as is also the case in the united states. for example, you might have real estate dynamism in florida, whereas in massachusetts things are not going that fast. we have to accept that a very vast continental economy might have different features. that being said, at the aggregated level of the euro area it is clear that we have dynamism in outstanding credit for housing, and dynamic price increases in various available real estate figures, which are a cause of tension and that we are monitoring carefully. 28 ) how is this influencing your monetary policy decisions? answer : i have mentioned several times that, in the governing council ’ s decision - making, we have paid particular attention to real estate developments and we were impressed by the dynamism of the counterpart of the monetary aggregates which is the financing of housing. this was one among many other elements that we took into consideration when we increased rates. 29 ) you mentioned the advices that you got from executive branches and the imf. to follow - up on that, two months ago you were sent a letter by mr juncker asking for more contact with the ecb. you have already said in the press conference that there is enough contact. the executive branches kept asking for rate decreases and now they are asking you to pay attention to the euro exchange rate? do you think that the executive branches pay enough attention and respect to the central bank ’ s independence? answer : first, let me tell you that i have great esteem for jean - claude juncker, who has a very important responsibility in chairing the eurogroup. second, central bank independence is guaranteed by the treaty. in that respect, independence is guaranteed more nowadays than it was before under national legislation. i do not see any dispute on that. i trust that because the entire world, europe and european households know and see that we are independent. we have a very high level of credibility. that, i have to say, explains to a large extent why we are anchoring solidly inflation