:00:05. > :00:08.currency. The Europeans already had a problem to ensure financial
:00:08. > :00:12.stability in the euro area as a whole because of the problems of
:00:12. > :00:22.some sovereigns. That is the problem of financial stability
:00:22. > :00:27.
:00:27. > :00:32.which had to be fixed. Do you think this deal fixes it? The indications
:00:32. > :00:41.are good ones. The orientations are comprehensive and baked will be
:00:41. > :00:48.issues. It is a systemic problem. You have to cover the backstop for
:00:48. > :00:53.the sovereign and improve the Government's. What is at the heart
:00:53. > :00:58.of everything is that the crisis, which is a mix of all advanced
:00:58. > :01:03.economies, reveals your weaknesses. The paradox of the euro area or is
:01:03. > :01:07.that we do not have many weaknesses as a whole, but individual
:01:07. > :01:14.countries and economies did not behave properly and create its
:01:14. > :01:19.fertility. That comes out of an absence of sufficient governance.
:01:19. > :01:24.You say it has to be a plan that covers everything. There is a part
:01:24. > :01:28.that books about risk and a part about the rescue plan. But the rare
:01:28. > :01:38.huge holes. There is said it will detail. Does it really mean
:01:38. > :01:40.
:01:40. > :01:46.anything. The rescue fund is going to go from 440 be in euros to when
:01:46. > :01:55.-- billion euros to one trillion euros. It is despising risks, not
:01:55. > :02:05.producing it. These are Orient Way Asians. They are good. There is no
:02:05. > :02:08.
:02:08. > :02:18.doubt. But it is hard work. -- Gorry and --. The isn't it time for
:02:18. > :02:24.
:02:24. > :02:31.complacency because you have to implement all of them. Half of
:02:31. > :02:37.Greek debt may be written off. Eat I was Irish are no wonder why Irish
:02:37. > :02:46.taxpayers had to put off their Gympie date and Greeks had only 80
:02:46. > :02:54.per. This has to be seen through the system implications of all the
:02:54. > :03:04.decisions that it again. What has been decided by government, not by
:03:04. > :03:05.
:03:05. > :03:07.us. We took no part in his negotiations. As well as not in the
:03:07. > :03:12.previous one. It is the responsibility of the governments
:03:12. > :03:20.involved. What is extremely important is that you have
:03:20. > :03:27.something which is working and voluntary. Greece is a special case.
:03:27. > :03:34.It was said very clearly on 21st July and repeated in this case.
:03:34. > :03:42.are not worried about contagion's about any one who has been to
:03:42. > :03:49.Ireland, Spain or Italy asking: Why not us next? It is the
:03:49. > :03:54.responsibility of in debate will entities and the College of the
:03:54. > :03:59.heads to for the be consistent with what they said on 21st July and
:03:59. > :04:09.repeated that risk was risk. Everybody recognises that it is a
:04:09. > :04:14.
:04:14. > :04:20.special place. -- that Greece was at Greece. It is the system which
:04:21. > :04:26.is at stake. You have been careful to say that this is a decision by
:04:26. > :04:36.governments. That you were not part of the plan. A lot of people TCCB
:04:36. > :04:39.
:04:39. > :04:46.should have paid her a much larger part. -- think that the ECB.
:04:46. > :04:54.Central banks are being to live up to their responsibilities. These
:04:54. > :05:02.responsibilities a very heavy. When you do you are criticised. We are
:05:02. > :05:12.living in democracies. We have been criticised, Rolling Stones, or
:05:12. > :05:16.
:05:16. > :05:22.pictures in Treasuries. -- predecessor as, for instance.
:05:22. > :05:25.People do not believe that. They so you were not willing to do it
:05:25. > :05:31.originally and you back down for political reasons. Absolutely
:05:31. > :05:41.untrue. The German members of the governing council believes that.
:05:41. > :05:41.
:05:41. > :05:46.do not think so. NZ in cases it was an overwhelming majority and
:05:47. > :05:53.minority. But all decisions have been taken by the governing council
:05:53. > :06:03.which is used The Independent. There is no doubt of that in the
:06:03. > :06:03.
:06:03. > :06:09.month of its purpose. -- which used fiercely independent. Do you
:06:09. > :06:13.understand it when politicians say that this crisis could have been
:06:13. > :06:18.stopped if the European Central Bank had responded to the panic.
:06:18. > :06:23.Had stopped the irrational panic around countries like Italy. And I
:06:23. > :06:31.remind you that we will be the first Central Bank in the world to
:06:31. > :06:37.embark on measures on 9th August 2007 for 95 billion euros of
:06:37. > :06:45.providing liquidity on an unlimited basis on a fixed rate. We were
:06:45. > :06:50.criticised for that, for this bold as, for this swift decision. It was
:06:50. > :06:54.five days before every were be recognised that we had a visit
:06:54. > :07:02.judgement. The governing council of the Central Bank has taken
:07:02. > :07:09.decisions which were criticised from the start. I would not say at
:07:09. > :07:15.because we were criticised by its we win this is the Rigi... I would
:07:15. > :07:25.say that in any case we do not substitute for governments. Do you
:07:25. > :07:32.think it is true that he the ECB was willing to offer unlimited
:07:32. > :07:37.support that would solve the immediate crisis? No, because what
:07:37. > :07:42.counts easy determination and the will of governments to do what is
:07:42. > :07:51.necessary, taking into account their run responsibilities. That is
:07:51. > :08:00.what is look at why it all looks at us. And across be, with all the
:08:00. > :08:05.experience of the crisis, the backing... it is very important
:08:05. > :08:10.because we're living in the Cup receipts was the decision was taken
:08:10. > :08:20.in Germany be so is showing the Majority Whip the opposition and
:08:20. > :08:25.are much more united than was perceived by observers. Taking an
:08:25. > :08:30.appropriate decision is something which it's very important. A
:08:30. > :08:37.Central Bank cannot substitute for governments or Parliament. A trust
:08:37. > :08:45.that everybody knows we are bit without being credibility. The euro
:08:45. > :08:50.is a solid currency. It is credible for the next ten years. It is
:08:50. > :08:56.because we are signing the currency. The credibility is coming from the
:08:56. > :09:01.governments of ECB. Just to go back into the way into this crisis.
:09:01. > :09:06.There is a thing that there was a lot of complacency before the
:09:06. > :09:13.crisis from governments, regulators, financial institutions foster but
:09:13. > :09:19.somehow the ECB has tried to say we have no part in that. In 2008 you
:09:19. > :09:22.said the euro area did not suffer from major imbalances. How was it
:09:22. > :09:27.possible to say that when countries like Spain had enormous current
:09:27. > :09:35.account deficits? The paradox of this situation is that the euro
:09:35. > :09:45.area as a whole has... this situation much better than the US,
:09:45. > :09:51.they Japan and UK and other large advanced economies. 4.5 % of public
:09:51. > :09:59.funds to visit. At the end of this year more than half the level that
:09:59. > :10:09.you haven't the US or Japan. It is also true for the current account.
:10:09. > :10:19.On a consolidated basis approximate be balanced. It does not matter in
:10:19. > :10:21.
:10:21. > :10:29.advanced economies. The stability he and growth pact was absolutely
:10:29. > :10:33.necessary. We had to use a baby the finances of the individual
:10:33. > :10:42.countries. We did not change our and rhetoric. It is exactly the
:10:42. > :10:47.same. You believe that and you have always put it back. Looking back do
:10:47. > :10:53.you think it was a mistake to go ahead with monetary union without
:10:53. > :11:02.fiscal union? Without some form of, and finance Ministry that you may
:11:02. > :11:08.say is necessary. Certainly not. By a rigorously applied the Stability
:11:08. > :11:15.and Growth Pact, which was part of the treaty to create the euro area.
:11:15. > :11:20.If it had been rigorously applied we would not be in this situation.
:11:20. > :11:26.Have applied myself against the large companies in Europe in 2004
:11:26. > :11:31.amid 2005. They did not want the Stability and Growth Pact to be
:11:31. > :11:41.applied to them or to continue to operate. They wanted to dismantle
:11:41. > :11:46.
:11:46. > :11:51.More than that. You had to strive for public finance to be balanced
:11:51. > :11:57.or in surplus. The first time Spain had actually missed it was in 2008.
:11:57. > :12:00.The first time Ireland violated it was 2008. That is the reason why we
:12:00. > :12:05.have always asked for the structural opposition to be
:12:05. > :12:13.analysed and not only the nominal account situation. And it is
:12:13. > :12:18.absolutely clear that it is of the essence. If I can go back. We have
:12:18. > :12:22.a crisis which started in the other hemisphere, it started in the US,
:12:22. > :12:27.an ongoing crisis which puts into question all advanced economies,
:12:27. > :12:34.because it concentrates on the advanced economies. All advanced
:12:34. > :12:39.economies, without exception. Not surprisingly, this crisis operates
:12:39. > :12:44.as an X-ray. Everything that is unsustainable in the policies of
:12:44. > :12:53.all advanced economies are put into question very clearly. We all have
:12:53. > :13:03.problems. Not surprisingly, as I said, here the problem is not the
:13:03. > :13:08.USA as a whole, is the governance. It is not a new analysis for us. We
:13:08. > :13:12.have to continue our own analysis. And we are not practising
:13:12. > :13:17.complacency too much. Neither of benign neglect. It is true that we
:13:17. > :13:23.were criticised very heavily when we were saying that the Stability
:13:23. > :13:28.and Growth Pact is absolutely necessary, a lot of economists said
:13:28. > :13:32.it was too tight a jacket, you should not have it. At a time where
:13:32. > :13:37.there was a general benign neglect. I don't think that you could see
:13:37. > :13:43.that we were practising benign neglect. We infuriated governments
:13:43. > :13:48.and we were criticised by many economies -- economists and
:13:48. > :13:55.institutions because we were supposed to be much too orthodox.
:13:55. > :14:00.With the benefit of hindsight, that orthodoxy has been recognised as
:14:00. > :14:05.probably harmful. President Sarkozy has said that Greece was not ready
:14:05. > :14:12.for the euro. Do you agree? I would have to say that the decision to
:14:12. > :14:17.enter into euro was, to enter Greece into the euro, was taken by
:14:17. > :14:21.all the governments of Europe, without any exception. But with
:14:21. > :14:27.hindsight, were they wrong? I would say that all governments of Europe,
:14:27. > :14:34.without any exception, and with the hindsight, they should have applied
:14:34. > :14:44.rigorously the rules that existed in the EU, rigorously. But at the
:14:44. > :14:48.time, as I said, benign neglect, benign neglect of the markets, it
:14:48. > :14:51.was the Government's, individually and collectively, let the thing go.
:14:51. > :14:58.When we look at the way that the contagion has worked, Italy,
:14:58. > :15:02.everybody thought the numbers of bouquet for the last -- the numbers
:15:02. > :15:09.looked OK up until a few months ago. Now the markets are in trouble and
:15:09. > :15:13.any country cannot cover its debts if interest rates get high enough.
:15:13. > :15:17.If France is next on that list? Will you still say that the French
:15:17. > :15:21.government has to act? That it is right that it should lose its AAA
:15:21. > :15:25.rating? How do you feel about the role of France coming into it?
:15:25. > :15:31.message is the same for all countries in Europe. Be very
:15:31. > :15:36.cautious. You have to do what you have to do. And take into account
:15:36. > :15:41.all elements of a situation. Markets are moving every day, on a
:15:41. > :15:45.minute to minute, half-day two half-day basis, and you have to do
:15:45. > :15:50.the job. You have to endure in the medium to long run that they are
:15:50. > :15:53.right. And that is something which is important. One of the major
:15:53. > :16:00.lessons of the crisis, which was agreed upon by all advanced
:16:00. > :16:04.economies, and all emerging economy is, was very clear. First, market
:16:04. > :16:11.economies are the best way to produce wealth. This is not
:16:11. > :16:18.challenged. Second, financial markets are much too fragile, much
:16:18. > :16:23.too erratic and hectic, and we have to make them much more resilient.
:16:23. > :16:27.That remains true. We walked -- work on all fronts. But if they are
:16:27. > :16:31.erratic and hectic, that means we come back to the beginning,
:16:31. > :16:35.precisely the moment when central banks come in and say, this is not
:16:35. > :16:38.a reasonable view to have of Italy or of France. We are going to put
:16:38. > :16:46.an end to this panic. It is absolutely clear that for a number
:16:46. > :16:51.of reasons the credibility of the countries in the euro area has been
:16:51. > :16:56.put into question when it is absurd in terms of fundamentals. That is
:16:56. > :17:00.clear. But if it is absurd, why not stop that absurd panic? We are
:17:00. > :17:05.telling all governments to take all of the appropriate ways of
:17:05. > :17:14.communicating. One of the problems of Europe as a whole, you have, as
:17:14. > :17:20.I I er fundamentals than what you have in other countries.
:17:20. > :17:26.That being said, we have 17 democracies. They have to improve,
:17:26. > :17:31.and they are learning by doing, if I can say, to improve progressively
:17:31. > :17:35.their way of running governments in the euro area. But it is clear. I
:17:35. > :17:39.am totally confident. Because when you look at the various countries
:17:39. > :17:45.concerned, you know, of course, that their fundamentals are much
:17:45. > :17:50.better than his more or less thought by some of the observers
:17:50. > :17:52.from outside. One message that has come out of these 17 vibrant
:17:52. > :17:56.democracies that you talk about seems to be that although they are
:17:56. > :18:00.amongst the richest in the world, they cannot come up with enough
:18:00. > :18:07.resources to solve their own problems, they need to go cap in
:18:07. > :18:10.hand to China. The rest of the world is looking at us, and I am
:18:10. > :18:15.absolutely sure that the rest of the world is sharing the view that
:18:15. > :18:20.I just expressed, that the medium run, it goes without saying that
:18:20. > :18:24.the fundamental of Europe -- fundamentals of Europe are very
:18:24. > :18:33.solid and Europe is a very impressive Continent. I have no
:18:33. > :18:36.doubt of that. I did not hear myself having participated in the
:18:36. > :18:41.meetings that the Europeans were deciding to ask any other country
:18:41. > :18:46.to help. Are you shocked that they are now, but the head of the rescue
:18:46. > :18:51.fund has been to China? No mac. He has programmed his trip for a long
:18:51. > :18:54.time. He is in the US, in China. We are in a global world. But you
:18:54. > :19:00.don't think it is embarrassing for humbling? That Europe is going to
:19:00. > :19:04.China? Not at all. How do you think that the various other countries
:19:05. > :19:12.themselves in the advanced world finance? We are all on the global
:19:12. > :19:16.markets. The way that you describe the crisis, it is hard to match
:19:16. > :19:20.that with what seems to be the reality, which is, for example, why
:19:20. > :19:24.are the government leaders, at the summit, coming up with a very
:19:24. > :19:28.detailed, complex ways to increase the leverage of the rescue fund, if
:19:28. > :19:38.not because they have not got the money? The car provide the
:19:38. > :19:44.resources in the real world? Thank you. It is normal. It is
:19:44. > :19:52.normal what is happening? If I can simplify equity, with this equity,
:19:52. > :19:56.we go to other participants, it is the normal way of dealing.
:19:56. > :20:00.Everything is very normal? Interest rates are a normal subject for the
:20:00. > :20:03.European Central Bank. People say it was a mistake to raise interest
:20:03. > :20:07.rates in 2008 just before the collapse of Lehman Brothers, and
:20:07. > :20:16.there was a similar mistake this year, raising interest rates twice.
:20:16. > :20:19.Do you agree with that? Do you think it will be reversed soon?
:20:19. > :20:24.First of all, I will not say anything about the future. It
:20:24. > :20:29.depends on the governing council. And nothing but I say should be
:20:29. > :20:34.interpreted in terms of front -- future interest rates. Many only
:20:34. > :20:39.say that what is extremely important, in normal times, as well
:20:39. > :20:46.as in difficult times, is to southerly anchor expectations.
:20:46. > :20:52.Because if you have expectations, you add to the difficulties of the
:20:52. > :20:56.time. Inflation expectations are solidly anchored. They have always
:20:56. > :21:01.been, and remain solidly anchored, in line with a definition, which
:21:01. > :21:05.protects ourselves against the risk of inflation. Also, the risk of
:21:05. > :21:10.deflation, and in difficult times, when you have a recession, the risk
:21:10. > :21:14.of deflation is important. I think that what we have been doing, of
:21:14. > :21:19.course, all decisions are taken by the governing council as a whole,
:21:19. > :21:23.it is a team, a strong team, but we thought that it was appropriate in
:21:23. > :21:27.the circumstances. Finally, you may know that the American President,
:21:27. > :21:34.when he leaves office, he leaves a letter for his successor on the
:21:34. > :21:43.desk. Will you leave a matter for your successor? We are in
:21:43. > :21:50.permanently close contact. We are members of the same team. We are
:21:50. > :21:58.not... Not in an electoral contest. He took all the decisions with all
:21:58. > :22:02.of us himself. Of course he will have all that is needed. We do not