–Adds comments on fiscal consol, bond buys to story sent at 15:17 GMT

FRANKFURT (MNI) – The euro is a credible currency and not in
danger, ECB President Jean-Claude Trichet said in an interview with
Germany’s Frankfurter Allgemeine Zeitung released Friday.

“The euro is a credible currency whose inflation rate has been
below 2% for more than eleven years,” Trichet said. “The euro is not in
danger.”

Asked about recent forex intervention rumors after the single
currency’s sharp decline, Trichet said: “I never comment on
interventions.”

The ECB’s recent moves to purchase government bonds does not
represent a change in the bank’s monetary policy stance, he said,
assuring that it would drain the additional liquidity that it has
channeled into the financial system through the bond buys.

“We have full freedom of action and will never shy away from
observing our responsibility to preserve medium-term price stability,
also under difficult circumstances,” Trichet said.

The central bank is not letting governments or any other groups
pressure it into acting a certain way, the ECB president said.

“We don’t allow ourselves to be influenced by any government, any
social partner or any kind of pressure group. We act always fully in
line with our own responsibility. And that is the reason why we have
delivered price stability.”

“There has been no crossing of a line” by the ECB in its decision
to purchase government bonds, Trichet said. “Our line is price
stability, and our credibility derives from achieving this objective
over the medium term.”

The ECB’s latest moves are “fundamentally different” from those of
other central banks since, “we sterilise,” he said. “We ensure an
unchanged stance of monetary policy. This is why the liquidity supplied
is immediately being absorbed again in its entirety.”

The crisis over the last three years has been the worst since World
War II, and “had we not acted, it could have been the worst since the
First World War,” he asserted, citing doubts about the industrialized
world’s ability to put public finances in order.

Still, the Eurozone as a whole is on solid footing within the
industrialized world, he insisted. “Unfortunately, however, the same
cannot be said of all individual euro area countries at present.”

“That is the problem, but it had to be and it is being addressed,”
he said.

Trichet rejected the notion that the ECB’s decision to buy bonds
that banks and investors wish to unload is turning the ECB into a
European “bad bank.”

“We are only aiming at stabilising those markets that had stopped
functioning normally,” he said.

“But the first and absolute necessary condition for success is that
governments accelerate fiscal consolidation and are unwaveringly
implementing the tough measures that are indispensable,” he said.

Thanks to the most serious tensions on the markets, the bank has
reintroduced some of the non-standard liquidity measures it had
previously abandoned.

“You can be sure that we will exit those measures in a timely
fashion accompanying the improvements in the functioning of the
markets,” Trichet underscored.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

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