There is no good news for Europe

Statement of the President ot the ECB

Introductory statement to the press conference[1]

Jean-Claude Trichet, President of the ECB

Vítor Constâncio, Vice-President of the ECB

Frankfurt am Main, 4 August 2011

Based on its regular economic and monetary analyses, the Governing Council decided to keep the key ECB interest rates unchanged.

Given the renewed tensions in some financial markets in the euro area, the Governing Council today also decided to conduct a liquidity-providing supplementary longer-term refinancing operation (LTRO) with a maturity of approximately six months.

The operation will be announced on 9 August 2011.

Turning to fiscal policies, the Governing Council stresses the need for strict and timely implementation of the IMF/EU adjustment programmes in Greece, Ireland and Portugal. In addition, it underlines the importance of the renewed commitment of all Heads of State or Government of the euro area to adhere strictly to the agreed fiscal targets. For several countries, this requires announcing and implementing additional and more frontloaded fiscal adjustment measures. Those that enjoy better than expected economic and fiscal developments should make full use of this room for manoeuvre for faster deficit and debt reduction.

No good news.

Statement selected quotes:

As expected, recent economic data indicate a deceleration in the pace of economic growth in the past few months, following the strong growth rate in the first quarter.

On the other hand, downside risks may have intensified. They relate to the ongoing tensions in some segments of the euro area financial markets as well as to global developments, and the potential for these pressures to spill over into the euro area real economy. Downside risks also relate to further increases in energy prices, protectionist pressures and the possibility of a disorderly correction of global imbalances.

Risks to the medium-term outlook for price developments remain on the upside. They relate, in particular, to higher than assumed increases in energy prices. Furthermore, there is a risk of increases in indirect taxes and administered prices that may be greater than currently assumed, owing to the need for fiscal consolidation in the coming years. Finally, upside risks may stem from stronger than expected domestic price pressures in the euro area.

For monetary policy, it is essential that recent price developments do not give rise to broad-based inflationary pressures.

In short, the ECB will keep interest rates; will inject money into the banking sector from August 9 with loans or refinancing loans to six months, while urging countries of the euro area to meet the fiscal target agreed, announcing that the latter will require several countries to take further tightening measures. Although says nothing about direct assistance to Spain and Italy.

As for evaluations, notes that growth is slowing, the risks increasing, prices and inflationary pressures are also increasing and prospects are discouraging.

At the press conference President Trichet hinted that the ECB was now buying public debt of some countries in the European periphery, in an attempt to curb speculation against Spain and Italy.

The latter -the purchase of public bonds- and assessments of the ECB, some of which are upper in the selected quotes say more about the complex situation in Europe that the concrete measures taken.