jean - claude trichet : interview in handelsblatt interview with mr jean - claude trichet, president of the european central bank, in handelsblatt, germany, conducted by ms marietta kurm - engels and mr andreas hoffbauer on 12 may and published on 14 may 2010. * * * handelsblatt ( hb ) : mr trichet, you intend to withdraw all of the liquidity that you are currently injecting into the markets via the purchase of government bonds. do we have to face inflation in the euro area? trichet : no, not at all. price stability is our primary mandate and over the past 11½ years we fulfilled our mandate successfully. we have not changed our monetary policy stance. the additional liquidity that we are providing through the purchase of government bonds will be withdrawn again. interest - bearing time deposits are an appropriate way to withdraw this liquidity. hb : what induced you to take this extraordinary step on monday morning? you had made no mention whatsoever thereof at the press conference just three days earlier. trichet : on thursday afternoon and friday, we were facing a situation that we regarded as fundamentally abnormal. that situation deteriorated abruptly, sharply and extensively. the very moment where the agreement was reached in europe to provide greece with financial support and the imminent decision of the international monetary fund ( imf ) to approve the greek standby should have contributed on the contrary to ease tensions in the markets … hb : … which was not the case? trichet : no, the contrary happened. the situation in a number of financial markets was hampering the transmission of our monetary policy, a monetary policy stance that we had judged to be appropriate precisely the previous thursday. that had to be put right. the exceptional circumstances demanded that we act swiftly. hb : what volume will the purchase programme have? trichet : i do not provide any figures at the moment. hb : the markets would like to know in somewhat more detail how you intend to absorb the liquidity again. trichet : allow me to repeat myself : we are not changing our monetary policy stance. we are not embarking on quantitative easing. we will withdraw the liquidity that we will inject mainly through tendering term deposits. hb : will that be possible? trichet : of course. it does not present technical difficulties. that is what we intend to do. and let me say, that what counts, is our determination and

past and implementing those lessons rigorously. i am pleased to note that considerable progress has already been achieved in making countries and the whole system more resilient to shocks. in that context, i would like to highlight transparency and the promotion of best practices, two key elements of crisis prevention. transparency is a precondition for well - functioning markets, since it facilitates better risk management and leads to strengthened market discipline. it is therefore welcome that significant changes have been introduced in a number of fields. for example, it was not long ago that the imf itself started to disclose information on its policies and to encourage increased transparency by its member countries. it is also reassuring that a large number of international standards and codes of good practice have been agreed upon, covering such different fields as transparency in fiscal policy or in monetary and financial polices, banking supervision, corporate governance, accounting and auditing. transparency in the private sector is also crucial, as recent corporate scandals have again highlighted the crucial role that accounting standards play in this respect. i consider that the progress made in the field of transparency after the asian crisis is one of the main reasons for the absence of contagion in latin america and the emerging world following the argentine crisis. i believe that enhanced transparency helps investors to differentiate better between countries and that the countries ’ efforts to adhere to international standards and codes are well reflected in the markets ’ assessment of these countries. transparency and standards and codes are not the only elements that have been implemented to improve domestic policy - making, especially in emerging market economies, and to make them more resilient to shocks. the debates about sustainable exchange rate regimes, prudent and sustainable debt management and well - sequenced capital account liberalisation are just some examples of areas where important lessons have been learnt. in addition, in response to the growing importance of financial markets, there is an increased focus in the policy advice given by the imf and the world bank on financial sector policies and on vulnerabilities in domestic financial systems. to sum up, i believe that the considerable progress made should help to reduce the frequency and severity of crises. however, we are still learning the lessons of the past, and more work will be needed in important areas. 4. crisis management despite all the efforts put in on the prevention side, it would be too optimistic to assume that there will be no further crises. however, experience has shown that timely, efficient and smooth management of financial problems and their underlying causes in a country can