–Adds Comments on EU Commission, State Reforms to Story Filed at 535 ET

FRANKFURT (MNI) – It is essential to avoid the emergence of
second-round inflation effects, European Central Bank President
Jean-Claude Trichet said, adding that the ECB will always do what is
necessary to deliver price stability, in line with its mandate.

“We, as central bankers, are responsible for avoiding second-round
effects,” Trichet said in an interview published in Die Zeit on
Wednesday.

The ECB head stressed that the central bank has “ensured price
stability by taking the necessary decisions.”

The central banker said that the current rise in inflation had
nothing to do with the crisis, but was the result of the economic
expansion in emerging economies.

Trichet strongly rejected the idea that central banks, including
the ECB, had flooded the economy with money. The central bank has never
lost sight “of the fact that our mandate is to deliver price stability,”
he said.

Trichet also reiterated that the current crisis was not a “euro
crisis,” noting that the single currency had retained its value and
remained credible and stable.

“Our problem is that the fiscal policies of some member countries
have not been sound and that some countries are also lacking
competitiveness,” Trichet said.

“We at the European Central Bank take care of the monetary union;
it is up to politicians to improve very significantly the functioning of
the economic union,” he said. “We have always demanded this, and there
is no longer any excuse for sitting back and doing nothing.”

While reforms have been started, they do not go far enough, Trichet
said. “Our message is clear: we have to go as far as possible in
reinforcing European economic governance, at all levels,” he continued.
“We won’t give up on that.

Asked about the German-Franco proposals for competitiveness pact,
Trichet said that the central bank would support it “if its aim is to
improve the functioning of the economic union through greater
coordination and integration.”

Trichet noted that it was ironic that “we are already talking about
this new pact”, while Stability and Growth Pact reforms, as well as
other economic governance elements, are still being discussed.

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

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