“We are still living in a very demanding environment. The crisis is not over,” Trichet said during his speech on Monday at the official handover of the German Central Bank presidency from outgoing Axel Weber to Jens Weidmann.
Trichet added that the ECB would continue to separate its non-standard policy measures — liquidity injections and bond purchases — from its standard measures, such as its interest rates.
He also mentioned that “The Eurosystem has kept and will keep its sense of direction, strictly separating the standard measures, designed to deliver price stability, from the non-standard measures, designed to help restore a more correct monetary policy transmission mechanism.”
The focus is now on the next ECB monetary policy meeting on Thursday this week and is expected to keep interest rates unchanged at the current 1.25 percent. The ECB raised its benchmark interest rate by 25 basis points in March from a record low of 1.0 percent.
The new German Central Bank chief Weidmann said that Euro zone monetary policy must be normalized, adding that European reforms should make countries and private investors deal with the consequences of their decisions. He added that normalisation was a question “not of ‘if’ but rather ‘when’.”
Prior to his appointment as Chief of Bundesbank, Weidmann was German Chancellor Angela Merkel’s top economics adviser. During his term in office, he advised the German government to use an economic upswing to cut the country’s public deficit, setting an example to other European countries.
He commented: “To put the currency union on a solid footing again, the rules must be framed such that national finance policies, as well as private investors, deal with the consequences of their decisions.
During his speech at the official acceptance of his new role he mentioned that “Pushing financing burdens onto third parties cannot be seen as an attractive route.”