–Says EMU 2Q 2010 Growth Better Than Seen, Cautious Outlook

BRUSSELS (MNI) – The capacity of the euro as a currency to retain
its value is essential for maintaining investor confidence, which in
turn is key to the Eurozone recovery, European Central Bank President
Jean-Claude Trichet said according to the text of an interview published
on Monday.

The euro has lost value in recent months as investors worried about
the high debt levels in many Eurozone member states and how that would
impact the economic recovery.

“The euro is a credible currency which inspires confidence,”
Trichet told French newspaper Le Monde. “Confidence is the most
important ingredient for the consolidation of Europe’s economic
recovery.”

“The euro’s capacity to maintain its value is absolutely essential
for the confidence of investors both inside and outside the euro area,”
he said.

Trichet said he remains cautious about growth in the Eurozone, but
was more optimistic about economic prospects elsewhere.

“At the global level we are seeing very robust growth among the
emerging economies,” he said, adding that the “emerging economies are
driving global growth.”

“Within the euro area, some recent data suggest a phenomenon of a
recovery in growth in the second quarter of 2010 that is slightly higher
than expected,” Trichet said.

“But we must remain very cautious. Our future growth is nowhere set
in stone. It depends on all of us and on our ability to strengthen
confidence as quickly as possible,” he added.

Trichet told the newspaper that the measures taken in recent weeks
to support the Eurozone, which include a E110 billion bailout deal for
Greece, a E750 billion backstop fund for other Eurozone countries that
could run in to difficulty and government bond purchases by the European
Central Bank, were of such a magnitude that investors would never have
imagined them possible.

“They need a certain amount of time to take in decisions of such
magnitude,” he said, adding that he thought this “will happen
gradually.”

“But the measures are so significant in terms of both their nature
and their scale that there is no doubt that they will have a positive
effect on the markets,” Trichet said.

The ECB has come under some criticism for intervening in the
government bond markets, with many observers saying it means the central
bank is no longer independent and that these actions dent its
credibility.

Trichet dismissed this, saying, “We are totally independent of
governments and pressure groups of any kind.”

“Our mandate is price stability,” he said. “We are unswervingly
committed to price stability.”

He said the ECB re-absorbs all of the liquidity that it injects.

“We are not printing money and there is no change to monetary
policy,” he said. “The aim of our interventions is to enable certain
markets to function more normally, in order to ensure the correct
transmission of our monetary policy, which is unchanged.”

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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