More from Lane: Q: Christine Lagarde was........>

ECB: More from Lane: Q: Christine Lagarde was heavily criticised in March when

she said that the ECB isn't here to close spreads. Hasn't the institution,

through what it has done and contrary to what its President said, shown that

this is, in fact, its task?

- A: Before this crisis we could see significant differences in the interest

rates different countries had to pay on their own debt. In normal times,

interest rate spreads across countries reflect the economic fundamentals of each

country, including the levels of public debt. This is not something we are

trying to get rid of. But in March spreads were widening rapidly, in a way that

could not be explained by fundamentals. When there is market turmoil and spreads

widen rapidly due to market dislocation, the central bank has to act as a

stabilising factor for the markets. This is especially true in a monetary union,

where you can easily switch from the bonds of one country into those of another

country in the same currency. The stabilising presence of the central banks can

then rule out self-fulfilling flight-to-safety dynamics and illiquidity in

individual sovereign bond markets, and this is what we pledged to do.