. 21. one of the challenges the ecb has to deal with is that the cycles in the eurocountries are different. what can be said to those countries like ireland, spain and portugal who are in a difficult position now and for which the rate hikes are painful? the ecb has to care for the superior interest of the euro area. my message to the fellow citizens is that they share a common destiny with an entire continent as populated as the united states of america. when we look at the differences in growth between states and countries in the us and in europe, we have approximately the same level of differences. a large vast continental economy has necessarily to give breathing space to its components. and our monetary policy must be optimal at the level of the whole euro area ; exactly like the fed would not look what is in the interest of missouri, california or texas. that being said, there are numerous aspects of economic policies which are under the responsibility of the countries themselves : in particular the fiscal polices, the structural policies and the surveillance of the evolution of unit labour costs. 22. portugal, for instance, has quite a low level of inflation. when the rate rises, people look at the ecb, but should they be looking at what their governments have done in the past in order to put them in a better position to cope with the difficulties that arise from the single monetary policy? firstly, in anchoring solidly inflationary expectations the ecb is preserving a financial environment which is favourable for sustainable growth and job creation. because all medium and long term market rates are lower, all things being equal, if inflation expectations are in line with our definition : less than 2 % but close to 2 %. secondly, as i said governments, parliaments and social partners have important responsibilities also because a lot of policies are within the competence of national authorities. 23. you intend to go to peking after the olympic games. what will be the message to china? we will see with our chinese partners, for whom i have great esteem, whether we meet in china or in europe. as regards our message it is well formulated : as we said in the communique of the last g - 7 meeting, we appreciate the rise of the yuan but we consider that an acceleration of the appreciation will be in the interest of all parties concerned. 24. to what extent does the appreciation of the real euro exchange rate and the future impact on euro area growth cause you disquiet? i

it. the troubled asset relief program ( tarp ) legislation was requested in part to fill that void and authorized by congress on october 3, 2008. the revolving credit facility was established with the purpose of assisting aig in meeting its obligations when due and facilitating a restructuring whereby aig would sell certain businesses in an orderly manner, with minimal disruption to the overall economy. aig would repay the revolving credit facility over a period of two years as it sold assets. importantly, the revolving credit facility was ( and remains ) secured by a pledge of a substantial portion of the company's assets, including aig's ownership interests in its domestic and foreign insurance subsidiaries. as additional compensation for the revolving credit facility, aig agreed to issue to a trust for the benefit of the treasury, preferred stock convertible into 79 percent of aig's outstanding common stock. with these protections, the board believed that the authorization of the revolving credit facility would not result in any net cost to taxpayers. in connection with the extension of credit, aig's ceo was replaced. in addition, the new york reserve bank established a team to review the financial condition of aig, and monitor the implementation of aig's plan to restructure itself and repay the revolving credit facility. furthermore, as an ongoing condition of the revolving credit facility, the new york reserve bank staff established an on - site presence to monitor the company's use of cash flows and progress in pursuing its restructuring and divestiture plan. the federal reserve does not have statutory supervisory authority over aig or its subsidiaries as we would over a bank holding company or state chartered bank that is a member of the federal reserve system. rather, the rights of the federal reserve are those typical of a creditor and are governed by the credit agreement for the revolving credit facility. using these rights, the federal reserve works with management of aig to develop and oversee the implementation of the company's business strategy, its strategy for restructuring, and its new compensation policies, monitors the financial condition of aig, and must approve certain major decisions that might reduce its ability to repay its loan. the federal reserve has a team of about 15 staff members, led by senior officials, who conduct oversight of the company pursuant to the credit agreement. the team has frequent on site contact at the company to make sure the federal reserve is adequately informed on funding, cash flows, liquidity, earnings, asset valuation, and progress in pursuing restructuring and divestiture.