This is explained by the fact that we are supplying liquidity on an unlimited basis and that we have allowed collateral in a way which is more forthcoming. And this is true for all central banks. But for us, our weekly balance sheet in comparison with that of one year ago has increased by around 55 % [from around 1.3 trillion to 2 trillion euro]. Of course, this increase does not imply an increase in net liquidity, because a significant part of the liquidity we provide comes back in the central bank through the deposit facility. FT: That’s less than the Fed. Trichet: Yes, true. For the ECB part of it comes also from the fact that we have the counterparts of the dollar that we are supplying ourselves, and a counterpart of the dollar is our own collateral. The central banks are in a situation where they are playing a much more quantitative role than they used to play, and it is true for all of us. FT: Should there be more centralised supervision within the Eurozone, and should the ECB take responsibility? Is the ECB willing to take that responsibility if the politicians so desire? 6  BIS Review 159/2008  Trichet: As you know, we have always been in favour of a very close relationship between the central bank and the banking surveillance authorities. We said that long, long before any new problems, any new difficulties. We had a Governing Council position close to the start of the ECB, which we made public.
We have an exceptional situation, but understanding where exactly the limits are of the fiscal room for manoeuvre also depends on the culture. I see some cultures where people are very anxious that in the medium and long run the fiscal situation would be unsustainable, others that are reasoning short term. The “discount rate” which is implicit in the various cultures is not the same. We have to also take that into account. We don’t have a federal government. We don’t have a federal budget. If we unravel the Stability and Growth Pact we won’t rebuild it afterwards. It would have been unravelled. And what would I say then to American friends telling me, “you put the cart before the horse – you don’t have a federal budget or a federal government – but you have a single currency”? I understand that from the outside our setup might seem a little surprising, but taking everything into account, the credibility of the euro area, the fact that there has been a quid pro quo at the birth of the euro area in terms of the institutional framework, our setup is very solid. And don’t forget that there is also something which is not negligible. The role of automatic stabilisers is also important, and I urge the members of the euro area to display to which  BIS Review 159/2008  3  degree the worsening fiscal balances represent the functioning of automatic stabilisers.