–Adds comments on fiscal policy, confidence, pension reform, the euro

PARIS (MNI) – European Central Bank President Jean-Claude Trichet
on Wednesday refused to reveal the volume of sovereign bonds the ECB
intended to purchase, saying only — as he already has said — that the
decision to buy them was intended to restore normality to markets.

“I will tell you nothing about that,” Trichet responded when asked
about the size of bond purchases in an interview with France’s Europe 1
radio. “We are attempting to restore the normal functioning of markets
that have been functioning very abnormally,” he said.

“We are restoring normality to certain segments of the market, and
that is what we are seeing already,” Trichet said.

He dismissed as “absurd” the suggestion that by purchasing bonds,
the ECB was relaxing its price stability standards. “We have already
said we would reabsorb all the liquidity” injected by purchasing debt
securities, he said. He insisted that he had “fought for [price
stability] all of my life,” and noted the ECB’s success at keeping
inflation close to its goal since the creation of the euro.

“People can have confidence,” he said, adding that public
authorities and the private sector alike “must make the right
decisions.”

He denied that the ECB’s decision to buy bonds was a violation of
EU statute. “It’s completely in line with what the Treaty allows us to
do,” he said. “We hadn’t done it until now because it wasn’t necessary.”

Trichet rebuffed charges that the ECB’s independence had been
compromised by its latest decision. “I’ve had enough conflicts with
[government] authorities so that nobody can put in doubt my
independence,” he said. “We have always taken our responsibilities. We
have a sense of direction. Our direction is the stability of prices.”

In the current financial environment, “we must take rapid, rapid
decisions that do not put in doubt the stability of prices,” he said.

Trichet said the confidence of households, businesses and investors
was imperative. “Without confidence of businesses we can’t do anything;
without the confidence of investors we can’t do anything.” And in order
to restore that confidence, “returning to a sustainable situation with
regard to fiscal policy is essential,” he said. He touted the virtue of
“budgetary wisdom” and called for a reinforcement of intra-European
surveillance of national fiscal policies.

In particular, “Greece must rigorously apply the budget
consolidation plan that’s been decided,” Trichet said.

He said it was “clear” that France must reform its retirement
system, adding that “all countries must reform their retirement
systems.”

Trichet reiterated that the ECB enjoys good relations and
collaborates closely with all the major central banks, including the
Federal Reserve, the Bank of England and the People’s Bank of China. He
said the ECB was in close touch with its counterparts around the world
last weekend when it decided to embark on the bond buying program.

Asked about the fate of the euro, Trichet replied: “I am more than
confident in the future of the euro. The euro is not in question. What’s
in question are the budget policies conducted by governments inside the
Eurozone.”

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

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