Guntram Wolff: You have repeatedly stressed the global nature of this crisis. Could you please elaborate on this?
Jean-Claude Trichet: My understanding is that we are experiencing a crisis of the advanced economy, after all the emerging countries and all the other continents had to cope with this adjustment which appeared necessary in Latin America, in Africa, in the Middle East and in Asia. So the years 2007-2008 were the turn of the advanced economy, with a crisis that had three episodes. The first episode was the financial turbulences from August 2007 to mid-September 2008. Then we had the dramatic intensification with the Lehman Brothers bankruptcy, with a lot of very bold decisions taken by governments, executive branches and by the central banks.
And then we had the third episode, which is the episode of the sovereign risk where we are now. The epicenter of this new episode is in Europe and the euro area, while the epicenter of the two first episodes was in the United States. In a way, the epicenter of the crisis has crossed the Atlantic. It requires a lot of courage to deal with this crisis, which is again a global crisis of the advanced economy.
Guntram Wolff: You’ve also highlighted the need to think about the long term in the Eurozone and in Europe as a whole. What exactly do you mean?
Jean Claude-Trichet: I really trust that the management of the crisis itself has to be operated effectively and successfully. On the other hand, we also have to get an idea of what we want to improve very significantly in terms of the economic union. I myself have said that we have to make a leap in the direction of economic union. And it appears to me that if we want to be sure that we take all the benefits of the single currency we have to improve significantly what has already been decided by the Europeans, namely the Enhanced Stability and Growth Pact and the new pillar which is the monitoring of competitive indicators and imbalances inside the euro area. In both cases my belief is that we have to be able to activate a decision making process at the level of the center. A democratic decision making process involving profoundly the European Parliament, instead of the present fines. The present sanctions are fines. I believe that if we want to be up for the long term responsibilities of the Europeans, we have to embark on the activation of what I call an economic federation by exception. When you behave inappropriately, you must have the activation of the entire body of Europe, including the European Parliament, to decide and avoid the difficulty in which one particular country could put the whole of the euro area.