ECB press conference transcript with highlighted dictionary words

Date: 2010-08-05

Introductory statement

Based on its regular economic and monetary analyses, the Governing Council views the current key ECB interest rates as appropriate. It therefore decided to leave them unchanged. Considering all the new information which has become available since our meeting on 8 July 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon, benefiting from low domestic price pressures. The available economic data and survey-based indicators suggest a strengthening in economic activity in the second quarter of 2010, and the available data for the third quarter are better than expected. Looking further ahead, and taking into account a number of temporary factors, we continue to expect the euro area economy to grow at a moderate and still uneven pace, in an environment of uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence.

Monetary policy will do all that is needed to maintain price stability in the euro area over the medium term. This is the necessary and central contribution that monetary policy makes to fostering sustainable economic growth, job creation and financial stability. All the non-standard measures taken during the period of acute financial market tensions, referred to as" enhanced credit support '' and the Securities Markets Programme, are fully consistent with our mandate and, by construction, temporary in nature. We remain firmly committed to price stability over the medium to longer term. The monetary policy stance and the overall provision of liquidity will be adjusted as appropriate. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely.

Let me now explain our assessment in greater detail, starting with the economic analysis. After a period of sharp decline, euro area economic activity has been expanding since mid-2009. Euro area real GDP increased, on a quarterly basis, by 0.2% in the first quarter of 2010. The available economic data and survey-based indicators suggest a strengthening in economic activity in the second quarter of 2010 and the available data for the third quarter are better than expected. Looking further ahead, and taking into account temporary effects, the Governing Council continues to expect real GDP to grow at a moderate and still uneven pace over time and across economies and sectors of the euro area. Ongoing growth at the global level and its impact on the demand for euro area exports, together with the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system, should continue to support the euro area economy. However, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors and labour market prospects.

In the Governing Council 's assessment, the risks to the economic outlook are broadly balanced in an environment of uncertainty. On the upside, the global economy and foreign trade may recover more strongly than is now projected, thereby further supporting euro area exports. On the downside, concerns remain relating to the emergence of renewed tensions in financial markets, renewed increases in oil and other commodity prices, and protectionist pressures, as well as the possibility of a disorderly correction of global imbalances.

With regard to price developments, euro area annual HICP inflation increased to 1.7% in July, according to Eurostat 's flash estimate, from 1.4% in June, most likely owing to upward base effects in the energy and food components. In the next few months annual HICP inflation rates are expected to display some further volatility around the current level. Looking further ahead, in 2011 inflation rates should remain moderate overall, benefiting from low domestic price pressures. Inflation expectations over the medium to longer term continue to be firmly anchored in line with the Governing Council 's aim of keeping inflation rates below, but close to, 2% over the medium term.

Risks to the outlook for price developments are broadly balanced. Upside risks over the medium term relate, in particular, to the evolution of commodity prices. Furthermore, increases in indirect taxation and administered prices may be greater than currently expected, owing to the need for fiscal consolidation in the coming years. At the same time, risks to domestic price and cost developments are contained. Overall, the Governing Council will monitor closely the future evolution of all available price indicators.

Turning to the monetary analysis, the annual growth rate of M3 turned positive and was 0.2% in June 2010, after -0.1% in May. The annual growth rate of loans to the private sector increased slightly further but, at 0.3%, remained weak. Together, these data continue to support the assessment that the underlying pace of monetary expansion is moderate and that inflationary pressures over the medium term are contained. Shorter-term developments in M3 and some of its components and counterparts have remained volatile, and this volatility may well persist.

The previously strong impact of the interest rate constellation on monetary dynamics, while still affecting the pace of underlying money growth, appears to be gradually waning. This implies a gradual reduction in the effect on actual M3 growth arising from the downward impact of the steep yield curve and the associated allocation of funds into longer-term deposits and securities outside M3. At the same time, the annual growth rate of M1 has continued to moderate, although it remained strong at 9.2% in June 2010. In part, this reflects somewhat higher opportunity costs of holding overnight deposits relative to other short-term deposits.

The still weak annual growth rate of bank loans to the private sector continues to conceal countervailing developments, with increasingly positive growth in loans to households and stabilised negative annual growth in loans to non-financial corporations. A lagged response of loans to non-financial corporations to developments in economic activity is a normal feature of the business cycle.

The data up to June indicate that, after expanding for a few months earlier in the year, the size of banks ' overall balance sheets has not increased further. The challenge remains for banks to expand the availability of credit to the non-financial sector when demand picks up. Where necessary, to address this challenge, banks should retain earnings, turn to the market to strengthen further their capital bases or take full advantage of government support measures for recapitalisation.

In this respect, we welcome the EU-wide stress-testing exercise, which was prepared and conducted by the Committee of European Banking Supervisors -LRB- CEBS -RRB- and national supervisory authorities, in close cooperation with the ECB. This stress-testing exercise was comprehensive and rigorous, and the results confirm the resilience of EU and euro area banking systems as a whole to severe economic and financial shocks. The stress test has also significantly enhanced transparency regarding the current financial conditions and risk exposures of the 91 institutions that participated in the exercise. Hence, the exercise represents an important step forward in restoring market confidence.

We also welcome the commitment made by national authorities with regard to the provision of support facilities for banks where private sector means are insufficient. Sound balance sheets, effective risk management and transparent, robust business models are key to strengthening banks ' resilience to shocks and to ensuring adequate access to finance, thereby laying the foundations for sustainable growth, job creation and financial stability.

To sum up, the current key ECB interest rates remain appropriate. Considering all the new information which has become available since our meeting on 8 July 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon, benefiting from low domestic price pressures. The available economic data and survey-based indicators suggest a strengthening in economic activity in the second quarter of 2010, and the available data for the third quarter are better than expected. Looking further ahead, and taking into account a number of temporary factors, we continue to expect the euro area economy to grow at a moderate and still uneven pace, in an environment of uncertainty. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence.

Turning to fiscal policies, it is essential that budget plans for 2011 and beyond reflect a strong commitment to returning to sound public finances. Given the exceptional fiscal deterioration over the past two years, there is an urgent need to implement credible medium-term consolidation strategies aimed at restoring fiscal sustainability and creating room for budgetary manoeuvre. As a minimum, countries ' budgetary targets must comply with the fiscal consolidation requirements foreseen under the respective excessive deficit procedures. More ambitious targets, as already adopted by a number of euro area countries, may become necessary where current plans fall short of meeting the main objective of halting and reversing the increase in the government debt ratio. Moreover, all countries must specify credible fiscal adjustment measures, focusing on the expenditure side, while being prepared to implement additional measures, where needed, over the coming years.

In order to support the process of fiscal consolidation, to underpin the proper functioning of the euro area and to strengthen the prospects for higher sustainable growth, the pursuit of far-reaching structural reforms is essential. Major reforms are particularly needed in those countries that have experienced competitiveness losses in the past or that are suffering from high fiscal and external deficits. Measures should ensure a wage bargaining process that allows wages to adjust flexibly to the unemployment situation and losses in competitiveness. Reforms to strengthen productivity growth would further support the adjustment process of these economies.

Questions and answers

Question: I have two short questions: despite the successful banking stress test, money market rates have not really come down and excess liquidity is creeping up again. The overnight rate has fallen back a little bit, but the three-month rate keeps going up. I was just wondering how you interpret this, and whether you are actually happy about this development.

Question: My other question is: when can we expect the ECB to announce whether it intends to resume its exit strategy, because you have only committed to giving unlimited three-month loans at the benchmark rate until the end of September? Are you going to tell us next month whether you intend to extend that or not, particularly against the backdrop of the fact that the Federal Reserve System seems to be becoming more concerned about having to ease monetary policy a bit further?

Trichet: In answer to your first question, I would say that we are, of course, happy that the stress tests were successful. Taking everything into account, including the unlimited supply of liquidity that we continue to practice the present level of liquidity is due to the less dynamic demand by the banks for this liquidity. We therefore have a situation where, in our view, it is normal to see some augmentation in the EONIA interest rate. It is part of the normalisation of the situation. It was not normal to permanently have an enormous amount of excess liquidity in the market.

Question: Would you welcome it at this stage?

Trichet: I do not welcome it particularly -- it is part of the normalisation of the situation.

Trichet: As regards your second question I do not comment on future rates. The Governing Council considers today the present monetary policy rate to be appropriate and there are no signs at the moment suggesting us to change interest rates. As regards the money market, we see this market functioning a little bit better -- the volume of transactions in the overall money market has increased significantly, perhaps even doubled. Therefore, we are not yet in a normal situation, but it is certainly heading in the right direction in terms of activity in the money market. As regards the" non standard '' measures, we will meet as usual next month and we will do what we consider appropriate, taking into account all circumstances, as always.

Question: The ECB has dramatically reduced its purchases of government bonds, to just under $ 100 million last week, I believe. Could you say whether it is your intention to wind this programme down, whether you expect to maintain it at very low levels like this?

Question: Furthermore, given that these purchases do appear to be winding down, I was wondering if you could look back over the last few weeks of this programme and tell us what some of its successes might have been and how you would address the critics, especially in Germany, who have said that there is a longer-term issue here in terms of the ECB 's credibility and its intervention in government securities markets?

Trichet: With regard to your last point, I have to say that I have already addressed the issue on a number of occasions in the various media, and not only in Germany. I have explained what we did and why, namely to help restoring a functioning of our monetary policy transmission.

Trichet: With regard to your first point I would say that we have seen a significant improvement in the overall market situation, which, not surprisingly, has meant that the level of activity in that particular programme has been very meagre. You will remember that we did not say in advance that we will purchase a certain amount -- we said that we would act as necessary, taking into account our objective. I am happy that the level of activity in this programme is meagre, because if it were n't, it would mean that the situation is worse than it is. That being said, however, I am not going to be complacent about the present situation because I know that a lot of challenges lie ahead of us. I would nevertheless draw your attention to the fact that the Governing Council of the ECB is there to ensure steadiness, continuity and a sense of direction. You know better than anyone that our environment can be volatile and it is up to us to provide an anchor not only for price stability, but for the confidence that is so necessary in Europe and also in the world, to the extent that we are an important participant in the global economy. I say this also on behalf of my colleagues who are central bankers and have exactly the same stake in being steady, solid anchors. In this regard, I have to say that I am particularly happy that we have a very strong anchoring of inflation expectations, as it is our primary mandate to deliver price stability. It is remarkable that throughout this recent period -- the three, four, five last months -- inflation expectations remained very solidly anchored despite the turbulences, as evidenced by the information extracted from the financial markets and the information collected from the various surveys and panels.

Question: How do you see this programme evolving now, if you have reduced purchases so much, do you expect to continue?

Trichet: I will not comment further on this issue.

Question: Are you concerned that the recent rise of the euro might significantly slow the euro area 's export-led recovery or do you welcome it as a sign of returning confidence in the region?

Question: Also I noticed in your introductory statement that you have dropped the word" high '' from uncertainty three times and I am wondering whether that means that you are now more confident that the recovery will not be derailed even if there should be further financial market tensions.

Trichet: On the first question, you know that I never comment on the exchange rates, except when I have something to say. And at the present moment I have no particular message.

Trichet: As regards your second question, I am a little bit surprised by your interpretation because I am not sure that we had a particular message on that point. We do consider that we are in an environment of uncertainty. We do consider that we should not be complacent in any respect. Of course, we have had recently good indications, from both hard data and soft data, and we consider that both the second quarter and probably also the third quarter are likely to be better than had been expected. But we are certainly not declaring victory, nor would we say that we are now in a period of active growth. It remains uncertain and it remains uneven, as I said on behalf of the Governing Council, and we are in a situation where it is likely that the second semester will be much less buoyant than the second quarter, for which we expect to see flattering figures. Again, I remain prudent -- we will see the figures when they come. But on the basis of all the information available, including today, from hard data and soft data, we have a situation which is better than expected. But as you will remember, after the dramatic freefall of the real economy last year, when we observed that we were bouncing back, we did not declare victory. We said that we were happy that we were back to positive figures, but that it remained something which had to be viewed with great caution. And we were right not to declare victory, you might remember, because we then saw that the growth of the last quarter of last year and the first quarter of this year were very modest. So we have good news, but let us remain prudent and cautious, and let us do all that we can to preserve confidence, to be the anchor of confidence that is so important in the present environment. It is what we have been consistently doing since the beginning of the crisis -- since 9 August 2007 -- and we will continue to be the necessary anchor of confidence. If, despite the turbulence we have experienced during the last few months and despite the very negative judgements that some participants in the market might have had, wrongly of course, on the euro area and on Europe in general, the euro area prove able to surmount all these difficulties with no major or significant impact on the real economy as a result, I think part of the credit will come to the Governing Council of the ECB and we would be proud of that.

Question: I wonder, Mr Trichet, if you could tell us what the ECB 's expectations are for the US economy in the second half of the year and for the global outlook -- Asia shows signs of slowing as well -- and how that will or might have an impact on the euro area.

Question: And in that context, are you happy or at all concerned that there has been a de facto tightening of monetary policy in the euro area because of the higher market interest rates and the stronger euro, at a time when the Fed is stating that a more accommodative stance is perhaps possible?

Trichet: On your first question, it will not surprise you that, taking into account the level of mutual confidence that we have in the constituency of central banks, I rely very much on the Fed 's judgement of the US economy and the conclusion I draw is that in the United States, as well as in Europe, we have to be aware of the ups and downs in sentiment. Sentiment is sentiment. Reality is reality. We have to look at facts and figures and what is really going on. So, I think that after having been extremely negative about Europe and extremely positive about the United States, we are now observing some kind of swing in the other direction. However, I did say that while we were happy to see better figures for Europe and a level of confidence which is higher than before, we were not declaring victory. In my mind it would be very premature to draw a negative conclusion on the US economy at this moment. We will see what happens.

Trichet: On your second question, I am not sure that we can characterise the situation quite as simply as we said, because on the one hand you have the objective figures that you were implicitly mentioning -- the EONIA, the EURIBOR interest rates and also, as regards the external side of the coin, exchange rates. On the other hand, you also have a lot of spreads that have fallen, you have the level of confidence, as I already mentioned, that has increased after having been very low. So, regarding the overall monetary and financial environment of the real economy, I am not sure that you can suggest that it is tighter than was the case before. I would suggest that it could be the contrary, taking into account the confidence channel and the fact that we are now, from that standpoint, in a situation which is obviously better than before. Again, I am not declaring victory. We remain cautious.

Question: First, I do understand that you do not want to declare victory yet on this development, but if you compare what is happening now with two or three months back -- in particular with regard to the confidence figures that you mentioned and also perhaps the factory order figures that were released in Germany today, as well as, for instance, the ten-year spreads that are narrowing quite significantly between, let 's say, Spain and Germany, and finally the euro, which has come from below 1.20 to stand now at above 1.30 -- are you less alarmed, definitely, about the situation now?

Question: And second, what did you really learn today from the Survey of Professional Forecasters, especially in terms of looking ahead at the inflation and also the growth forecast, in particular since you were saying that the second semester might perhaps not be as buoyant as the second quarter?

Trichet: Well, again, it is our function to be anchors of stability, also in an environment which is volatile. So I am no more or less alarmed than I was three months ago: we are steady, we always maintain our composure and it is our duty to do so. We demonstrate sang-froid and we have to do this in all circumstances. So the Governing Council took the situation as it was four months ago, three months ago, two months ago, and we take it as it is today. I would say we are reasoning in the medium to long-term. From time to time we really have to tell a number of market participants that they are probably wrong in their immediate assessment, what is the real situation in our view. We keep our composure as much as possible in all circumstances. And this is what everybody expects from us, including our fellow citizens and, of course, the financial market itself. Markets would be totally upside down if they could not rely on solid, steady central banks. And I am not speaking for the ECB particularly, but for the whole constituency of sister institutions.

Trichet: As regards your second question on our forecast at this stage, I would not change in any respect the predictions that we made last time. At our next meeting we will see what our new projections are, but again, I would warn against drawing too hasty conclusions from what we have observed. I believe that we will have a good second quarter and that we will have a third quarter that will probably be better than previously expected. I will stick to that at this stage and I will not draw any conclusions for the period to come.

Question: How much do you think money markets have improved since the publication of the bank stress tests?

Trichet: I think that a number of factors have played a role. I think that the success of the stress tests has demonstrated that the Governing Council of the ECB was wise in recommending stress tests, in recommending the publication of the results at the level of individual banks and in recommending as much transparency as possible. We also always recommended that this information should be displayed, at the same time, all over Europe, following the same template. This proved to be a very good way -- after all, it had already been experienced in the United States. So, the stress tests played a role, but we are in an environment that is also incorporating a number of other factors on top of the stress tests, such as the elements of the real economy that are better than expected and the decisions that have been taken by a number of countries that go in the right direction, as we had suggested, in terms of resolute fiscal retrenchment and re-establishing their own credibility. It seems to me that it is this very comprehensive set of information that has been captured by the market, and which signals that things are going back to normal progressively.

Question: I have a question on financial regulation. We have had the decision of the Basel Committee, which you chaired, on the capital rules, which have in some respects been watered down quite significantly. Is n't the risk here that this piece of legislation or agreement, which has been described as the heart of the regulatory agenda, is really not going where it is supposed to go, and that the financial industry is winning over the regulators?

Trichet: I would not say at all that the discussions that took place in Basel have watered down in any respect future rules and regulations. On the contrary, it seems to me that this was an early judgement, which was wrong, and that there is now a feeling that it is an important step forward. In any case, as you know, we will meet again in September. This meeting will deal with calibration, which is extremely important, as well as how to organise the transition. So, what has been published in Basel is in full accord with what we have said since the very beginning: that we require better quality, quantity and international consistency of capital, that we have to strengthen the liquidity standards and that we have to reduce pro-cyclicality. Nevertheless, very important decisions remain to be taken, as I just said, particularly with regard to the calibration, which is decisive. In any case, I think the industry itself understands pretty well that what is important for us is to be sure that, in the medium term and as a permanent regime, we have a financial system that is resilient. We can not put ourselves in the situation that we faced in 2008, when the public authorities were obliged to take on a level of taxpayer risk that was absolutely gigantic and very abnormal. This is extremely important, because we have had a recession, which has been very deep, and there has been an enormous price to be paid for the free fall of the real economy. But there is another reason: I do not think that our fellow citizens will twice accept risking 27% of GDP of taxpayers ' money to support the financial system in order to avoid what could have been a great depression. We had a recession, not a depression. And the risk of a depression in the future would remain high if we do not have a financial system which is sufficiently resilient. So, we are very determined to make the system much more resilient. That said organising the transition is something which is natural in the present circumstances. It seems to me that this confirmation that we will have a transition period was understood by the banks as something important.

Question: I also have a question about Basel III. If I understood well, there was one national central bank that was against this improvement in the quality of capital. So in September do you think that you can agree also without this national central bank? Or will the fact that this national central bank is against a better quality of capital mean that you will have to come to a middle way, I mean the hybrid capital?

Trichet: I think that the main message of the party concerned was that insofar as we have not decided on the calibration and on the transition period, we can not consider that there is already a package that has been decided. Perhaps you could put the question directly to the central bank in question and to the supervisory authority in question, because both the central bank and the supervisory authority were at the meeting in Basel. As you know, the meeting is called the GHoS, meaning Governors and Heads of Supervision. It takes place at the global level with the emerging countries fully present. I have to say, speaking as an active participant that it is remarkable that all these global issues are discussed with the industrialised countries and the emerging countries on exactly the same footing and with a remarkable contribution by the emerging countries themselves. And this is something which is part of the new global governance that we have introduced since the crisis.

Question: The results of the second quarter bank lending survey showed conditions tightened unexpectedly and the banks are expecting further tightening for the third quarter. Do you still entirely rule out the risk of a credit crunch in the euro area?

Trichet: Regarding the results of the bank lending survey, it seems to me that the period of the survey was not the best period, because it was done between 14 June and 2 July 2010. If you remember the situation at that time, you might imagine that to some extent we have to take into account the period in question. That being said, in the figures for June loans to non-financial corporations over twelve months were at -1.9%, which is a little less negative than in the previous month and up to now seems to us to be in line with historical observations after a recession of the size that we experienced, unfortunately, in the previous year. As regards households, we see that the dynamism of loans to households seems to be confirmed, at 2.8%. The figure was 2.6% in the previous month. And that is also in line with historical observations, so what we see at present is confirmation of historical observations. We are not over-interpreting these results and we should not declare victory, but certainly they do not confirm or suggest that we could have a credit crunch. I do not think that it is at all appropriate to say that.

Question: Germany might have good growth figures this year, and there are no signs of deflation. In other countries, such as Ireland, we see deflation signs and we see still shrinking GDP. In the future, how big do you think that challenge will be for the ECB in terms of monetary policy?

Trichet: I think it is a challenge that we had to face permanently since the very beginning of the euro. Germany had very flat growth for many years at a time when Ireland was buoyant, so we had exactly the same issue, but in reverse. What is extremely important is to consider that we have to take our decisions taking into account 330 million people -- a number of people in the same order of magnitude as the United States. And we have to consider what is in the best interests of all, namely to be sure that all our decisions permit the delivery of price stability -- which we have achieved for 11 and a half years -- fully in line with our definition of price stability, i.e. inflation of less than, but close to, 2%. And we have achieved this in a better fashion than was the case before the introduction of the euro in the equivalent of the euro area since WWII. We have the best track record over a period of more than 10 years. This is something which is perceived by the market and one of the main reasons why inflation expectations are so well-anchored. That being said, we have different situations. Some countries, like Germany in 1999, had to catch up in terms of their competitiveness, which was insufficient at the time. And I have to say that Germany has done a fantastic job over 10 to 11 years to regain competitiveness. It is remarkable, but it was not achieved by chance, it was achieved because year after year hard work was being done. In other country cases, we have had a level of buoyancy which was abnormal. In such cases, the national authorities have to take their own responsibility. We are responsible for monetary policy ; all the other elements of economic policy are in the hands of national authorities, including fiscal policy and also all elements of national policy that can influence the competitiveness of the country, including unit labour costs and all competitiveness indicators. Since the ECB was created, this has been our permanent message to member countries: your monetary policy is a given, you can rely upon the delivery of price stability at the level of the euro area as a whole. Now you have to be fully cognizant of the fact that a lot of economic responsibility rests with the national authorities. That is the way the system functions. That is our permanent message.

Question: The new member of the Governing Council, Mr Jozef Makuch, ruled out an interest rate increase in 2010. Is that reliable information?

Trichet: I never comment on what my colleagues say, because they do not speak on behalf of the Governing Council. I am the porte-parole -LRB- spokesperson -RRB-, and if I am not here it is the Vice-President. That being said, we are never pre-committed, as you know -- it 's contrary to our principles.

Question: May I ask another question? Is n't it dangerous for the stability of the financial markets and of the economy if you leave the interest rates so low for such a long time? And that the banks can have, at that low interest rate, all the refinancing they want? Are you just feeding the banks? What are you doing?

Trichet: Again, we consider that the present level of interest rates is appropriate. That being said, we will always do what is necessary to deliver price stability and to be credible in the delivery of price stability. It is not by chance that I can say now that over 11 and a half years we have delivered price stability. It is a remarkable track record, but as you might remember -- we took decisions in 2004, we took tough decisions in December 2005 -- which infuriated a large number of our counterparts ; and we even took decisions in 2008, in July, which was also during a period of turbulence, which proved that we were not taking our responsibility of delivering price stability lightly. At the moment we consider the 1% rate to be appropriate. We can -- and we will always -- do what is necessary to deliver price stability. And we have proved that it 's not an empty promise.

Question: You said before, Mr President," I think part of the credit will come to us if, despite the turbulence we have experienced and the negative judgements of the markets, the euro area is able to surmount all these difficulties ''.

Trichet: I was speaking of the real economy of the euro area.

Question: The real economy? My question was: when you say" the credit will come to us '', do you speak here of the economy or of the credibility of the ECB?

Trichet: I said that if it appears, ex post -- which has yet to be proved -- that we have been able to pass through this difficult period without the real economy being very significantly, negatively influenced, which was the working assumption of a large number of observers, then perhaps part of the credit could come to the central bank. I said only part of the credit, in any case.

Question: A little question. A lot of people here, in this room, may think that you deserve a restful holiday after this difficult period. Can you tell us, what is your main occupation in the next weeks?

Trichet: I will, very fortunately, like all my colleagues, from time to time have a little rest. And my usual place to rest is the small and beautiful city of Saint-Malo in Brittany.

Question: You talked in your statement about the third quarter being better than expected. But in answer to an earlier question you talked about the second half of the year being much less buoyant than the first half. Putting the two together, can one conclude that you expect a slowdown in the second half of the year, but not as much of a slowdown as you initially feared?

Trichet: I said that I would compare the second half of the year with the second quarter, which we expect to be dynamic. I do n't think we should over-interpret that. It is true that we expect the two last quarters of the second half of the year to be significantly less dynamic than the second quarter, because the second quarter seems to be really exceptional. But I would not elaborate more on that. Again, the main message is: we remain cautious and prudent. We consider that we undoubtedly have a recovery ; the double-dip is very fortunately totally out of the question, in our opinion, for the present moment. But, again, growth is likely to remain uneven and relatively modest.

Question: Mr Trichet, coming back to the credit which should be given to the central bank...

Trichet: We are very prudent, cautious and modest.

Question: I know that, but still, maybe it is time to say some good things. Given the improved situation when you look at the money markets, the bond markets, everything has relaxed a bit or calmed down. Yes, it looks like the ECB has proven to have taken the right decisions at the time in May, especially also on the bond purchasing programme. What, in retrospect now..., or how would you assess or evaluate the criticism, which has been quite strong in May and June, especially from Germany, of your measures, when you look at the situation now?

Trichet: I would say that I have been central bank governor for approximately 17 years. It is not a job where you have no criticism. It is one of the jobs where you have the most criticism, which I consider normal. We are living in very vivid democracies with public opinion debate which is very vivid and, coming from a country which is legendary for its capacity to engage in criticism, I had formidable training in my own country !

Question: If you could allow me to come back to the stress tests. You said you considered them a success. All the same, are there other things that could be done that would improve confidence even more? For example, should some banks be raising more capital? A lot of analysts were surprised by the relatively small amount of capital that needed to be raised.

Trichet: As a matter of fact there has been an" optical illusion '' in the level of capital, because a number of banks had been recapitalised immediately before the stress tests. So, when you look at what had been done in terms of recapitalisation in Europe, you see that the results of the stress tests are not at all indicative of what has really been done. Immediately before, I am speaking of figures under your control, Vítor ; we had something like $ 15 billion that had been already done for recapitalisation. And a very important amount of recapitalisation had been done in the year before the stress tests. So when we make comparisons with the United States we have to take into account the fact that our own stress tests came after massive recapitalisation, whereas the US stress tests came before the massive recapitalisation. That makes a difference. And the market has understood that pretty well, it seems to me. As regards the recapitalisation and elements that could permit the banks to reinforce their balance sheets, we are very clear on that. We are encouraging all possible means for the commercial banks to reinforce their balance sheets. This is not new ; the Governing Council did not wait for the stress tests to say:" Take advantage of issuing stocks and shares in the market. Put retained earnings at a level which would permit commercial banks to reinforce their balance sheets. Why do n't you embark on taking advantage, when necessary, of the public facilities that exist? ''

Trichet: I see that there is absolutely no question on Greece, which I appreciate enormously. I guess it is because you have already read the communiqué of the IMF, of the Commission and of the ECB. And I think this is something which is part of the overall picture. This does not mean that very hard work should not continue to be done, of course, but it is something which is again, as I said, part of the overall picture.