ANALYSIS:The ECB president denies interest rate hike will increase pressure on 'periphery' states
ECB PRESIDENT Jean-Claude Trichet dismissed suggestions that yesterday’s interest rate hike would increase pressure on Ireland and other so-called “periphery” euro zone states.
Battling hayfever and a sceptical press pack pushing him on Ireland, Mr Trichet insisted the ECB governing council’s decision was not intended to help or hurt any one country but to maintain price stability to benefit “directly and indirectly all 331 million citizens in the single currency area”.
“We do what we have to do even when it is difficult and not necessarily pleasing to everyone, that’s our job.” Referring to peripheral countries, he said: “It is in their interests to follow their plan. They have to do what is necessary and they have the means to do so.”
Mr Trichet indicated he did not support any Irish proposals to include private bondholders as part of a rescue plan, saying that those who suggest such measures should “reflect on the confidence of the market”.
“What is important is to get back to the market as soon as possible because then you’re back to a market in a normal situation, you don’t need any more help and don’t need to be placed in an abnormal situation,” he said, suggesting that markets would be spooked by hitting private bondholders. “These are the responsibilities of all governments but the main message is: confidence in the markets.”
Welcoming the recapitalisation of Irish banks, Mr Trichet said that markets appeared to understand and accept the results of last week’s stress tests.
“The communication that accompanied the very important decision to recapitalise banks by the government was understood by all,” he said.
The central banker denied the bank’s economic policy was dictated more by the needs of Germany, the euro zone’s largest economy, than by smaller peripheral countries. Instead, he said, the ECB was sticking to its rulebook and that euro zone member states should stick to the austerity plans they have agreed.
His message to countries in economic straits: to remain “ahead of the curve in terms of their own public finances, maintaining their costs at competitive level and making appropriate structural reforms”.
“Of course there are some countries in a precarious and difficult situation and this requires more work,” he said. “All countries will benefit directly and indirectly and the euro zone will have more growth and job creation.”
