European Central Bank President Jean-Claude Trichet was quoted by a German newspaper as saying inflation in the euro zone would be very low over the next 10 years, with expectations currently for around 1.8 percent.
In the coming 10 years, the inflation rate will most probably stay very low; current expectations are for around 1.8 percent, he told the mass-selling Bild am Sonntag newspaper, in one of the final interviews of his term heading the ECB.
This means: in the euro zone we have price stability. This is something we are very proud of, and rightly so, because we have achieved what is expected of us.
Trichet said European governments had made serious mistakes by not sticking to the Stability and Growth pact.
They did this although the ECB emphatically warned them to follow the criteria.
Trichet, who said he would certainly remain active after stepping down as ECB president, called for a change of values in financial markets.
We should be very aware of the fact that some ways of behaviour on markets caused considerable irritation. One such thing is the level of some bonus payments, Trichet said.
Banks must raise their level of resistance and avoid behaviour that is not in cohesion with the values of our society -- including excessive bonus payments.
He said regulatory bodies should ensure financial market innovations served the real economy and did not damage it.
At the moment we are working on correcting this, he said.
There is an agreement among all authorities worldwide that we have to discipline the markets and in general the financial system, and we have to make sure that they are considerably more resistant under all circumstances in the future.
But the central banker warned against restricting banks too much, given that this would have negative impact on the real economy they financed.
Trichet said Europe needed to strengthen its political structures, which would require changes of the constitution.
He called for stronger European governance, making it possible to implement the necessary measures in those countries that continuously contravene the stability criteria and endanger the financial stability of the euro zone.
In the long run, we will have to go further down the path towards political union, he said.
(Reporting By Sarah Marsh; Editing by Ralph Gowling)