ECB’s pres­i­dent says there is no Euro cri­sis

La­hore, Is­lam­abad, Karachi Satur­day, De­cem­ber 04, 2010, Zul Haj 27, 1431

The Pak Banker - - Front Page -

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

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