Transcript of the questions asked and the answers given by Jean-Claude Trichet, President of the ECB, and Lucas Papademos, Vice-President of the ECB
Question: Just a few short questions. Particularly on the growth outlook: I have not actually read the introductory statement yet, but am I right in picking up that you have dropped reference to data pointing to moderate but ongoing real GDP growth? Because you have always said you expected growth to be weak in the second quarter, that you basically expected a trough now, but you expected growth to pick up again towards the end of the year. Now data has come in worse than many people expected and some people would say that there is a real danger of a recession in the euro area economy. So, can you comment on that, can you comment on whether you see the risk of recession in the euro area?
And also, you said last month you have no bias in terms of your monetary policy stance. Is that still the case?
And also, in light of upcoming wage negotiations in some large euro area countries, were some members of the Governing Council of the opinion that you should be in a stance of heightened alertness, or strong vigilance?
Trichet: On the first question, you remember that last time, a month ago I said that we would have, at mid-year, a trough, in our own understanding, and that we should, in any case, add up the first quarter and the second quarter to take into account the fact that the first quarter was, in certain economies in particular and in the euro area as a whole, exceptionally robust. And I will certainly confirm that. We will see what our new forecasts, our new staff projections, are when we meet in September. Then I will display the new staff projections and I will be more in a position to comment on your question. At the present moment I would say that what we have seen is that as regards the risks that we have listed as the downside risks for growth in the euro area – I did that last time on behalf of the Governing Council, and also in the month before – there is some materialisation of these risks that were identified. But they were already identified: thus for us, it is not a surprise. We knew that there were risks, and those risks are materialising. I have already, last month, identified clearly the second and third quarter of this year as being particularly weak. Later on we will see, and it will be much better to discuss that during our next rendezvous in September with the new staff projections.
As regards your second question, what is important in what I have said is that, on the basis of our current assessment, the current monetary policy stance contributes to achieving our objective. And, I would say as candidly as possible, we have no bias. And, as you know, we are never pre-committed and we always do what we judge, at any time, appropriate to deliver price stability and be credible in the delivery of price stability.
On your third question, which was on the wage and salary negotiations in particular, again, you might have noted that when we are speaking, on behalf of the Governing Council, of wages and salary increases, we also mention the price-setting issue. And we are not making any difference between this particular price, which is wages and salaries, and the other prices, where we might judge that there is not sufficient competition between the firms and where some price-setting is abnormal. As regards wages and salaries, we have had a very clear message for a number of months or quarters, and I will repeat now very solemnly that we consider it absolutely essential that we have no second-round effects in this domain. It’s essential not only for price stability; it’s essential for medium-term sustainable growth and job creation and for preserving the substantial progress which has been made in this domain over the last years.
Question: I have very similar questions, but one thing I did not understand in what you have said. You were speaking of weakening growth in the middle of 2008, in part expected – does it mean that the other part was unexpected, and is growth going worse than you were expecting?
And I did not hear any comment on the oil prices, which decreased considerably in the last weeks. Do you think it will have an impact on inflation and will slow down inflation faster than you thought?
Trichet: Let me take your second question first. I have mentioned on a number of occasions, on behalf of the Governing Council, that the price of oil – and not only of oil, also of food – was high and volatile. I would say that “volatile” captures pretty well the evolution that we have seen in the most recent period. We have had a peak, and then it went down. We will see what happens. We are entirely pragmatic, and predictions of the future prices of commodities are probably the most difficult exercise you can imagine. Personally, I consider that the peak in the price of oil and commodities was abnormal and did not correspond to what would be an equilibrium price. But we will see what happens. We have to be, again, totally humble in the presence of facts and figures, and we will see what happens. I think “high and volatile” is a good description, a good way to capture things in the present situation.
As regards your first question on growth, again, what we are seeing is that you have the technical correction of the second quarter, after a first quarter which was extraordinarily robust, particularly in some countries, in Germany in particular. So since the very beginning it has been perfectly known that we would have a correction, a technical correction. And that is the reason why we always said that we had to take both the first and the second quarter together into account. Now, I have also mentioned other phenomena that are playing their role: in particular, but not exclusively, the slowing down at a global level, the dampening effect of the very high level of oil and commodities, which have added of course to the difficulty in this respect. But again, I give you a rendezvous for September as regards more precision in this domain with the new staff projections.