By David Barwick

FRANKFURT (MNI) – The measures taken to support Greece and other
Eurozone member states will work, European Central Bank President
Jean-Claude Trichet said in an interview conducted last Friday and
published earlier this week.

Trichet, in Moscow to celebrate the Bank of Russia’s 150th
anniversary, told Russia Today that the situation in Greece is already
radically different from what it was at the start of the year.

He expressed appreciation for Russian Prime Minister Vladimir
Putin’s comments in support of the euro, and reacted with apparent
approval when asked how he would view Chinese purchases of Greek banks.

“Of course the markets are looking at realities and I’m sure that
when they see that the appropriate adjustments are made they will take
that into account,” Trichet said.

Europe’s monetary authorities support the creation of the
Stabilization Fund, given that it “of course would be based upon very
important, strict and serious conditionality,” Trichet said.

As to Greece, he affirmed, “what we have today is completely
different to what we had only five or six months ago.” The steps taken
by the various parties show “the help that can come from both the IMF
and the peers” and result “in a situation where we have a strong program
and we are very keen, as has been done only a few days ago, to oversee
its implementation on the spot with the IMF and the Commission.”

Asked whether a permanent support mechanism or some sort of
insolvency procedure would be appropriate if these steps failed to work
with Greece and other countries, Trichet replied simply: “My working
assumption is that it will work.”

The measures taken by “the Eurozone in particular” are currently
being “looked at by the market, by investors, and are progressively
incorporated into other decisions — they are very, very important and
are to be respected,” he said.

Reminded that Russia’s Putin has said his country is committed to
the euro, Trichet responded that he has “appreciated enormously what has
been said by Prime Minister Putin.”

Trichet strongly suggested that he would not oppose the
hypothetical purchase by China of Greek banks.

Asked about that possibility, he replied: “I said that I appreciate
that European securities, European investments are attractive…I always
said speaking of the euro myself that the euro is a very credible
currency, which has kept its value in terms of price stability…”

Turning to the ECB’s government bond purchase program, Trichet
promised again that “all the euros which will be injected because of
this program will be withdrawn euro for euro.”

The Treaty establishes stable prices as the primary goal of the
Eurosystem, he reminded. This is what Europe’s people are asking the ECB
for “and it is what the expectations are of what we’ll do over the
medium- and long-term period,” he said.

The stress tests to be applied to Europe’s banks “will have
appropriate and, I would say, appropriately coordinated parameters and
working assumptions,” Trichet said.

If the tests indicate problems, “it’s up to each particular
country” to deal with them, he said.

The economic recovery depends on consolidating confidence among
households, entrepreneurs, businesses and investors, Trichet said.

“It is clear that if — which is the goal — the governments are
able to demonstrate that they have the appropriate plan to go back to
sustainable fiscal policy,” this will shore up confidence and thus the
recovery, he said.

Asked what should have been done differently from the outset of
monetary union, Trichet replied that “the strict, rigorous
implementation of the Stability and Growth Pact, which was a crucial
part of the EMU, proved to be absolutely of the essence.”

It is also “extremely important” that governments “behave properly”
— not merely because of their commitment to do so but because they are
being observed by each other, “under close monitoring by their peers,”
the ECB president said.

“All the system functions on the basis of, I would say,
multilateral surveillance exerted by peers,” Trichet continued. “I call,
myself, on behalf of the Governing Council of the ECB, for decisive
progress in implementing this multilateral surveillance framework.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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