— Sidesteps Questions on Finnish Vote, Greek Restructuring Rumors
— Makes No Comment on Outlook for ECB Rates

FRANKFURT (MNI) – European Central Bank President Jean-Claude
Trichet, in an interview with two Finnish newspapers published Tuesday,
said European unity is “more important than ever” but would not
comment on the ballot-box ascendancy of anti-euro sentiment.

In an interview with the Helsingin Sanomat and Kauppalehti
newspapers, Trichet said of the win last weekend of the True Finns party
that the ECB fully respects “the functioning of our democracies.”

“Taking into account the historical challenge, which Finland
perhaps knows better than other European countries over the last 60
years, it seems to me that all the reasons why the ‘founding fathers’
had this vision of European unit are still there and they are even
stronger now,” he said.

“When we look at the changes all over the world, the extraordinary
growth of the emerging economies, such as India, China, Brazil, Mexico,
Russia and the remarkable development of Latin America and Africa, we
see that European unity is more important than ever,” he continued.

Revisiting the ECB’s quarter-point rate hike earlier this month,
Trichet said it is “extremely important to prevent second-round
(inflation) effects after the ‘hump’ in the headline inflation rate.” It
is “not acceptable,” he said, to allow any perception that energy and
food inflation might become persistent influences on overall inflation.

Trichet made no comment on the outlook for ECB rates.

The ECB is proud of its solid track record, to have “delivered
price stability averaging yearly prices increases of 1.97%. “It is
extremely important to continue solidly anchoring inflation expectations
in a period which is marked by uncertainties and turbulences,” he said.

“We have risks of second-round effects here and there,” he
continued. “We have to be very alert that they do not materialise.” In
fact, he said, “At the moment I do not see any significant materialising
of second-round effects and I do not see un-anchoring of inflation
expectations. But this is no time for complacency.”

Despite the poor fiscal conditions, and in some cases crisis
conditions, in some European countries, Trichet said the ECB is “not
compromising on our primary goal of maintaining price stability, and our
interest rate decisions are designed to fulfil that aim.”

“Any other approach,” he said, “would be unthinkable.”

Trichet side-stepped a question on speculation that a Greek
restructuring of some sort is inevitable. “There is an important
adjustment plan which has been adopted by the Greek government to reform
its fiscal and structural policies.” The plan, he added, “is being
applied.”

Of the U.S., hit by an unprecedented negative outlook by Standard &
Poor’s for its sovereign debt rating, Trichet repeated that, “I
personally have full trust in the United States for preserving its
creditworthiness and the authority of its signature (on its money).”

He also repeated that he “entirely shares the view” of U.S.
authorities that a strong dollar is in the interest of the United
states.” Asked about the Finnish lumber industry’s vulnerability to
disadvantageous exchange rates, he said “keeping a lid on costs” and
increasing productivity “is essential to be competitive.”

Of its “non-standard” monetary policy measures, Trichet again
distinguished between the interest rate mechanism intended to preserve
price stability and those actions intended to stabilize markets.

“Non-standard measures are temporary by nature,” he said. “I do not
imagine that we would have them permanently, because that would be
relevant only in a permanent situation of dysfunctional markets, which
is of course not our working assumption.”

On the question of when the non-standard measures will have run
their course, he replied, “I have nothing further to add” and then
repeated it.

He refused to break new ground on the subject of Ireland and
Greece, saying the ECB has eased collateral requirements only in view of
the “strict conditionality” of their programs. “No government takes
lightly the fact that it has negotiated a programme that implies very
strong conditionality with the international community and the European
institutions,” he said.

“At the end of the road stands the return to normal financing with
market access,” he said. “That is always the goal.”

Trichet said he never comments “on my succession.” The European
Central Bank should, he said, “not depend on an individual.”

Asked his opinion of Axel Weber, Trichet said his service was
“constructive and discreet” and his service “has been appreciated.”

Asked about Weber’s self-described dissent about pursuing
“non-standard” measures, Trichet said the breadth of the ECB’s
responsibilities spanning 17 countries “explains why we have a principle
of speaking with one voice.” He said he had “no comment” on Weber’s
apparent divergent opinion.

He declined to express an opinion on the merits of a fixed-rate
mortgage versus variable rates but said again, citizens “can rely on us
to be an anchor of stability.”

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