Jean-Claude Trichet: Interview in The Wall Street Journal Interview with Mr Jean-Claude Trichet, President of the European Central Bank, in The Wall Street Journal, conducted by Messrs Brian Blackstone and Marcus Walker on 19 January 2011. *  *  *  WSJ: If 2008 and 2009 were years of crisis, and 2010 was a year of stabilization and recovery. How do you see 2011? What should Davos participants be focused on this year? TRICHET: Since the start of the recovery, in the third quarter of 2009, the real economy has surprised up on the upside. This is encouraging. I see 2011 as a year of continuous hard work, to make the financial sector more resilient and to improve the soundness of fiscal policies. The crisis, which started in 2007 and intensified in September 2008 revealed the fragility of the financial sector first and then the relative vulnerability of public finances in the advanced economies. WSJ: What worries you most? Trichet: To consider that because we managed to avoid a depression and are now experiencing the recovery, we could lose momentum in the reforms that are still urgently needed. That is the main danger. WSJ: This year austerity becomes pan-European. But a recent United Nations report said austerity risks a renewed economic downturn. Do you agree? TRICHET: No, we do not. I do not buy the very simple reasoning that would suggest that pursuing sounder fiscal policy would hamper growth.
WSJ: When you spoke of a quantum leap last year, you referred to quasi-automatic sanctions on excessive deficits. Governments so far haven’t come along. What makes you optimistic that you can still get your point of view adopted by governments? TRICHET: There are a number of elements that are important: the reinforcement of sanctions; the reinforcement of the independent diagnosis that would be made by Commission. It’s a set of quantum leaps, including the quasi-automaticity of the start of the corrective procedures and of the sanctions, which in our view is extremely important. Governance is now discussed by the European Council and the European Parliament. The Parliament has in the past always demonstrated a remarkable capacity to capture what is essential for Europe. So, the involvement of the Parliament is very important. WSJ: Last year, governments made a watery compromise on sanctions, weaker than the European Commission’s proposals. Should governments rethink that compromise? TRICHET: Even the initial proposals from the Commission seemed to us too timid. Our position has not changed. WSJ: You have called for maximum flexibility for the European Financial Stability Facility. There is discussion whether EFSF should take over all or part of the bond buying program from the ECB. If that were to happen, would you be relieved? 2  BIS central bankers’ speeches  TRICHET: As I said, they have to improve the stabilization fund in both quality and quantity. By quality I mean having a tool that is as flexible as possible.