–But Sees Some Elements “Not Moving In The Right Direction”

FRANKFURT (MNI) – European Central Bank President Jean-Claude
Trichet said in a videotaped interview with the Wall Street Journal that
“until now” the ECB has not seen “alarming second round effects,” but
“there are some signs here and there that are not going in the right
direction.”

Among those signs is “indexation of some prices and some wages in
Europe that are also counterproductive from that standpoint,” Trichet
said. The video was posted on the newspaper’s website.

Trichet said that for now, inflation expectations in the Eurozone
remain “very well anchored.” However, “we must remain alert and we are
alert.”

The ECB chief added: “This is the regular attitude that we have:
when there is a hump in the CPI, we clearly signal that we will not let
the second round effects put that hump as permanent inflation.”

Responding to the recent clamor about a possible restructuring of
Greece’s debt, Trichet noted that a plan calling for economic
adjustments had been approved and he stressed that “the plan has to be
applied.”

“I would only say ‘apply the plan’ for all countries that have a
plan,” Trichet repeated when questioned about the possibility that
contagion could spread to Spain, the Eurozone’s fourth largest economy.
“I would also say, as we have always said to all countries, to be ahead
of the curve, take all the measures to credibilize their own fiscal
situation,” he added.

Nevertheless, he praised Madrid for the steps it has taken so far
and noted that markets had also reacted favorably.

“Spain has taken a lot of strong measures over the period that went
all in the right direction,” Trichet said. “I have observed that the
judgment of the market participants was favourable for Spain after these
decisions were taken and implemented,” he added. However, “this is not
to say that we should be complacent. In all countries, there is a lot of
hard work [to do].”

Asked what he would do after October, when his term as ECB
President ends, Trichet said he had not yet made any plans. “All that I
know is that I will continue to be active,” he said.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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