A duel of words

EUROPEAN CENTRAL BANK PRESIDENT JEAN-CLAUDE TRICHET

ON MONETARY POLICY

"We make a very clear distinction between what we call the standard measures and the non-standard measures. Standard measures, interest rates, for us, have to be designed in all circumstances to deliver price stability in the medium run. We consider that the very solid anchor of our inflation expectations is one of our major assets. It's been preserved since the start of the euro, it's been preserved through all the turbulences we have known and are knowing, and it's something which we consider absolutely essential for confidence in Europe. ... And, of course, deriving from that, it helps considerably in difficult circumstances as part of the overall preservation of appropriate growth in the economy."

ON INFLATION EXPECTATIONS

"If we would not give the sentiment that are still solidly anchoring inflation expectations, I would expect of course that the nominal interest rate, whatever the spreads, and there are a variety of spreads in the euro area ... and this level of all nominal medium and long term interest rates would incorporate the destabilization ... of the inflation expectations."

ON POLITICAL CHALLENGES

"We are ourselves challenged paradoxically not necessarily -- as a group, as an entity -- because our fundamentals are very bad; our fundamentals are not very bad. ... The problem is that we are challenged in our governance. This is the key."

IMF MANAGING DIRECTOR CHRISTINE LAGARDE

ON RISKS TO GROWTH

"The global economy continues to grow, yet not enough. Some of the main causes of the 2008 crisis have been addressed, yet not adequately. There remains a path to recovery, but we do not have the luxury of time."

ON RISKS TO RECOVERY

"Actual progress on rebalancing has been timid at best, while the downside risks to the global economy are increasing. Those risks have been aggravated further by a deterioration in confidence and a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed. Developments this summer have indicated that we are in a dangerous new phase. The stakes are clear: we risk seeing the fragile recovery derailed."

ON FISCAL POLICY

"Macroeconomic policies must support growth. Fiscal policy must navigate between the twin perils of losing credibility and undercutting recovery. ... To meet the credibility test, each country needs a dual focus: on durable measures that will deliver savings tomorrow which, in turn, will help to create as much space as possible for supporting growth today -- at least by permitting a slower pace of consolidation where possible.

ON MONETARY POLICY

"Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation. ... So policymakers should stand ready, as needed, to dive back into unconventional waters."

ON EUROPEAN BANKS

"Banks need urgent recapitalization. ... If it is not addressed we could easily see the further spread of economic weakness to core countries, even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization -- seeking private resources first, but using public funds if necessary."

ON U.S. FISCAL CONSOLIDATION

"Credible decisions on future consolidation -- involving both revenue and expenditure -- create space for policies that support growth and jobs today. At the same time, growth is necessary for fiscal credibility -- after all, who will believe that commitments to cut spending can survive lengthy stagnation with prolonged high unemployment and social dissatisfaction?"