ECB's Trichet: Paying Great Attention To Market Developments By Granting Appropriate Liquidity

The European Central Bank is paying great attention to the developments in the markets and will continue to do so over the period to come, the central bank chief Jean-Claude Trichet said in an interview to the French daily Ouest France, Saturday.

When asked whether the current global market turbulence, arising notably from property difficulties in the US, is worrying him, Trichet replied that the ECB has been monitoring the market developments ever since it stated so after the Governing Council meet on August 2. By granting appropriate liquidity to the markets challenged with a credit crunch, the bank was sticking to its stance, Trichet noted.

On Thursday, the European Central Bank injected 94.8 billion euros or $130.2 billion at its main lending rate of 4% in a highly unusual move into markets after the overnight lending rates shot up to their highest level in nearly six years in response to some negative cues from the banking sector.

The news that shook European markets came from BNP Paribas, the biggest listed French bank. The banking giant halted withdrawals from three of its funds, citing inability to calculate a reliable net asset value for them due to the US subprime rout.

The ECB followed up Thursday's move with another injection of 61 billion euros at a rate of 4% on Friday in a three-day variable rate tender.

Trichet commented that the euro area economic growth diagnosed several months ago has been confirmed. He also added that IMF revised growth forecast for euro area this year.

In an answer to a question that whether this economic performance was translated into jobs, Trichet said that euro area as a whole generated more than 12 million jobs in the eight years since the formation of the euro in 1999. This is more than the U.S over the same period. The jobless rate in euro area is 6.9%, the lowest level in 26 years. Trichet said those who say that euro acts against employment don't have the figures to support what they are saying.

According to Trichet, “Price stability in itself isn't enough, but it is necessary”. Opinion polls found out that 63 million French people seek to ensure price stability, the central bank chief noted while replying a query linked to French criticism on the ECB's batting inflation.

“The French themselves have been historically attached to price stability, to monetary stability”, Trichet said. Further he said, “It is true of all the great national sensitivities. It's not by chance that the major symbolic figures of right and left - in particular, General de Gaulle and Pierre Mendès-France - were very attached to monetary stability.”

Trichet stated that he was pleased to see new EU nations joining the euro. He said it is the responsibility of the Executive Board and the Governing Council of the ECB to give the best possible monetary policy to vast single economy with a single currency.