PARIS (MNI) – The European Central Bank’s bond purchasing program
is continuing and market observers have seen that, ECB President
Jean-Claude Trichet said Friday.

Speaking at an event in Paris a day after his monthly press
conference, Trichet also repeated that ECB’s official interest rates are
“appropriate.” He also said it was “appropriate” to keep the central
bank’s non-standard measures for now, “given what we are observing.”

Trichet reminded that the ECB had announced on Thursday that it was
extending all of its fixed-rate, full-allotment refinancing operations
at least through the end of the first quarter.

“We have also said that our program of acquiring bonds is ongoing,
and that’s what observers of the market have seen,” the ECB chief added,
in an apparent reference to what traders said was an aggressive
intervention by the central bank on Thursday even as Trichet was
speaking to reporters in Frankfurt.

Trichet also reiterated his position against “excessive volatility”
in exchange rate markets and said emerging countries with managed
exchange rates — “China, but not only China” — should pursue policies
that lead to currencies that are “progressively more flexible.”

Asked if he thought Portugal or Italy were in danger of going the
same way as Ireland and Greece, Trichet dodged the question, saying only
that all European countries, “without exception,” must have “credible
goals” for next year and beyond.

Trichet stressed repeatedly the importance of tightening fiscal
surveillance and strengthening joint economic governance in the EU, and
particularly in the Eurozone. The need for stronger economic governance
in Europe is the “principal lesson” of the crisis, Trichet said. He
called for governance to be strengthened “formidably.” But he said a
full-fledged federal Europe was not realistic in the foreseeable future,
and he called instead for a “quasi-federation.”

Trichet also lauded last weekend’s statement by Eurozone finance
ministers announcing an agreement to create a new European Stability
Mechanism and detailing the circumstances under which private creditors
might be asked to accept a restructuring of their sovereign debt
holdings.

The use of “collective action clauses” which would allow creditors
to vote on a debt restructuring plan if a country is determined to be
insolvent, is not “divergent from the doctrine of the rest of the world”
or the IMF, Trichet said.

Before last weekend’s statement, markets had reacted violently to
Germany’s unspecified call for private creditor participation in future
bailouts, and the sell-off in peripheral government bonds of mid- to
late November was largely attributed to that.

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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