ECB’s president says there is no Euro crisis
Lahore, Islamabad, Karachi Saturday, December 04, 2010, Zul Haj 27, 1431
PARIS: There is no crisis with the euro as a currency, but there are problems of financial instability due to strained budgets in some European countries, European Central Bank president Jean-Claude Trichet said Friday, Wall Street reported.
In a radio interview on France's RTL station, Trichet the action being undertaken by the ECB in supplying ample liquidity to the market and keeping its key interest rates at low levels is aimed at reinforcing confidence by ensuring price stability.
He said the ECB has the same message for countries like Portugal that are experiencing budget problems: take all the measures necessary to ensure medium and long-term stability and promote growth and job creation.
Trichet said the goal isn't to reassure financial market operators, but for governments to take the necessary decisions to get their economies back on a stable track.
He recalled that in 2004 and 2005, when the euro zone was also facing difficulties, France, Germany and Italy had referred to the currency bloc's Stability and Growth Pact as being "stupid" and called for its constraints to be weakened.
"We said it must not be weakened; we have a common currency, there's no budgetary or political federation, we must have a very close surveillance of fiscal policies."
The economic crisis has served to highlight the weaknesses in the euro-zone system, Trichet went on, as the ECB is only responsable for ensuring price stability, and this has been achieved with less that 2% annual inflation over the past 12 years.
Euro-zone governments have adopted sound, "common sense" policies to correct their fiscal imbalances, he said.
In an interview with Valery Giscard d'Estaing in Friday's edition of Le Parisien, the former French president called on the ECB to stop lending at its base rate of 1% arguing that "there's too much liquiidity in the system." Trichet observed that the ECB's governing council had decided Thursday that the 1% level is "appropriate". Normally, he said, the ECB is criticized for having an excessively restrictive monetary policy stance.
"Such criticism pleases me," he said. "I'm more used to the perpetual criticism that we're too orthodox and that we should lower rates."
Trichet declined to comment on speculation that Deutsche Bundesbank President Axel Weber might be be a possible contender to succeed him at the head of the ECB when his mandate ends 11 months from now. "It's the heads of state and govt who decide," he said. -PB News