HELSINKI (MNI) – European Central Bank President Jean-Claude
reiterated here Thursday night the “principle of separation” between the
ECB’s standard interest rate policy and the non-standard liquidity
policies it implemented to confront the financial crisis.

He seemed to suggest that the ECB could hike rates again while
still leaving generous liquidity policies in place.

“I stress that we have been and will take in the future decisions
on standard measures independently of our decisions on non-standard
measures,” he told an audience of central bankers and other senior
financial figures at a conference dinner here marking the 200th
anniversary of the Bank of Finland.

“The ECB has indicated clearly that interest rate increases could
perfectly well take place independently of the timing of the phasing out
of the non-standard measures – if those non-standard measures continue
to be fully justified by the situation,” he added.

He gave as an example the Governing Council’s decision on April 7
to raise interest rates by 25 basis points even while maintaining the
bank’s non-standard liquidity measures through the second quarter.

“The monetary policy stance is always chosen by the Governing
Council to deliver price stability in the medium term,” Trichet
explained. “The non-standard measures have a clear purpose: ensuring
that the standard measures themselves are transmitted as effectively as
possible despite the otherwise abnormal functioning of some markets.”

Trichet also took the occasion to reiterate his call for a “quantum
leap forward” in the coordination of fiscal and economic policies among
Eurozone countries.

This will require greater “automaticity” in surveillance and
disciplinary procedures with less latitude for politicians to halt or
suspend proceedings against countries that don’t fulfill their
obligations under EU rules. The policy targets established should be
more ambitious “to better match the current reality of the euro area,”
Trichet said. Finally, he noted that the performance gap among Eurozone
member states must be closed.

“Binding commitments by member states to swiftly implement strong
national budgetary frameworks are essential,” the ECB chief argued.

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