Tags: EU | Europe | Financial | Crisis | ECB

ECB's Trichet Dismisses Inflation Fears Over Govt Bond Purchases

Friday, 14 May 2010 10:10 AM

The president of the European Central Bank has dismissed suggestions that its decision to buy government bonds might stoke inflation and urged nations to implement programs that will put them in a "sound fiscal situation."

Jean-Claude Trichet said in an interview with the German daily Handelsblatt, published Friday, that risks to European taxpayers won't arise from the new euro zone rescue package "if all governments concerned are faithful to all their commitments."

The text of the interview, which was conducted Wednesday, was posted on the ECB's website.

The ECB said Monday that it would buy government bonds -- a move called for by economists for weeks.

Combined with a nearly $1 trillion rescue loan program from the European Union and the International Monetary Fund, it did much to calm markets jittery about the continent's debt crisis.

Asked whether the 16-nation euro zone has to face inflation as a result of the bond purchase program, Trichet replied: "No, not at all."

He added that the ECB has fulfilled successfully its "primary mandate" of price stability for more than 11 years and "we have not changed our monetary policy stance."

"We are not embarking on quantitative easing," he said. "We will withdraw the liquidity that we will inject mainly through tendering term deposits."

He did not give any figures on the volume of the purchase program, but rejected the idea that measures taken by the ECB would dampen European growth.

"It is a complete fallacy to say that fiscal soundness dampens growth. It is exactly the contrary," Trichet said. "It is the absence of fiscal credibility which dampens growth."

"Greece was clearly in a unique exceptionally grave situation before it embarked on its adjustment program," he said. "But I call solemnly upon all countries to implement programs commensurate to recover sound fiscal situation."

Risks to European taxpayers won't materialize so long as all governments fulfill all their commitments, Trichet added.

"They must behave themselves properly and alert their peers, the other governments, to also behave properly," he said. "Mutual surveillance is essential."

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The president of the European Central Bank has dismissed suggestions that its decision to buy government bonds might stoke inflation and urged nations to implement programs that will put them in a sound fiscal situation. Jean-Claude Trichet said in an interview with the...
EU,Europe,Financial,Crisis,ECB
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2010-10-14
Friday, 14 May 2010 10:10 AM
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