More from the Schnabel interview: - Q: Are......>

ECB: More from the Schnabel interview:

- Q: Are you targeting specific spreads?

- A: We are not targeting spreads, but we are watching them carefully. One

useful metric that one can look at is the GDP-weighted euro area yield curve

that gives an indication of how tight financial conditions actually are in the

euro area. If we see that there is an unwarranted tightening of financial

conditions that is not consistent with our price stability objective, the ECB

will react. We saw that this curve actually shifted up quite dramatically at the

beginning of the crisis and our measures have been able to push it back even

though it is not at the same level as before the crisis. You can see that for

many of the indicators we look at. You can, for example, look at the funding

conditions for corporates or liquidity indicators. Most of them have gone down

quite substantially in response to our policy measures but they are still

elevated compared to the pre-crisis period. This shows that we are still not in

a stable situation and that we have to continue to act forcefully.