The ECB does not let its guard down in the face of inflation which, on the contrary, must be monitored with great attention because it will remain above 2% in the coming months as well. Words by Jean-Claude Trichet in front of the European Parliament that dampened the hopes of those who bet on a loosening of Frankfurt's monetary policy.
In short, there is no room for an expansive monetary policy, even if, Trichet acknowledged, the recovery which, in his words, will also be "modest" in the near future. Indeed, "there was a slowdown in the second quarter", admitted the central banker, "in a context of relatively sound fundamentals" which advises against abusing the leverage of monetary policy. Also because the difficulties that emerge on the front of the financial markets, he added, "remain strong, above all because of the uncertain prospects in some countries, not only in the peripheral ones, and this also applies to the world economy: even in the USA there are highlighted structural and fiscal difficulties".
For the president of the ECB, fears of a lack of liquidity in the European banking system are also unjustified. Indeed, in the Eurozone there are securities worth 14-15 billion euros which can be used to participate in the ECB's refinancing auctions to obtain liquidity in which, he added, about 420 credit institutions throughout the area participate.
But, above all, as Ben Bernanke had done in Jackson Hole, Trichet took the opportunity offered by the European Parliament to bash the politicians, who with their fluctuating attitude contributed to making the crisis worse. But, as had already happened last Friday, the banker's speech didn't slow down the run of stock lists, finally destined to experience a day of robust recoveries.
Trichet, in particular, launched a strong warning to those countries, Finland in the lead, which are calling into question the July 21 agreement on Greek debt. “All States – he spelled out – must respect what they have signed”. The ECB president also warned that "purchases of government securities on the secondary market cannot be used to circumvent the fundamental principle of budgetary discipline".
Thus the president of the ECB, Jean-Claude Trichet defended the decision to intervene on the BTP and Bonos, an initiative that does not affect the autonomy of the central bank. but this intervention must not diminish the Governments' commitment to fiscal consolidation. The countries of the euro area must, at the very least, meet their budgetary consolidation commitments, an obligation that bond purchases, decided to deal with tensions that had produced an increase in yields and reduced volumes to a minimum, cannot substitute.
