By Luca Di Leo
The U.S., Europe and other advanced economies face new formidable challenges in dealing with high debt and low growth, European Central Bank President Jean-Claude Trichet said Saturday.
Speaking at the end of a two-day meeting of top central bankers, Mr. Trichet said Europe was particularly challenged by its governance problems. Responding to questions by policy makers such as World Bank President Robert Zoellick worried by Europe’s ongoing debt crisis, he cautioned that overhauling the continent’s institutions is a “complex process… we’re observing history in the making.”
Fears have recently grown that Europe could be the source of another major global financial shock similar to the Lehman Brothers Holdings default in 2008 that sparked the financial crisis. Many believe the half-measures taken by European policy makers could lead the debt situation in the euro zone to become a full-blow banking crisis. European banks in solid economies like France and Germany are vulnerable because they hold sovereign debt of countries close to default like Greece.
Mr. Trichet urged governments around the 17-country euro zone to move decisively in implementing the crisis-fighting measures agreed by European leaders in July. Those measures, including a stronger bail-out fund to help troubled countries, still need to be approved by some countries’ parliaments.
Turning to concerns about Europe’s banks, Trichet said lenders should move to reinforce their balance sheet. But he dismessed worries about a liquidity crisis, saying the extraordinary ECB lending doesn’t make that possible.
Just before Mr. Trichet, International Monetary Fund Managing Director Christine Lagarde had a similar message for the audience Saturday: Risks to the global economy are rising and countries must be quick in adopting the right policy mix to ensure a continued recovery, she said.
The new IMF chief, a former French finance minister, said monetary policy should remain easy because the risks of recession are greater than inflation risks. Ms. Lagarde’s remarks appeared targeted at, among others, Jean-Claude Trichet. The European Central Bank has raised rates twice in the past four months, most recently a one-quarter point increase to 1.5% in its key short-term rate in July.
Mr. Trichet gave no indication he was thinking about reversing course on interest rates any time soon, saying that the anchoring of inflation expectations was one of Europe’s “major assets.”
Source: http://blogs.wsj.com
The U.S., Europe and other advanced economies face new formidable challenges in dealing with high debt and low growth, European Central Bank President Jean-Claude Trichet said Saturday.
Speaking at the end of a two-day meeting of top central bankers, Mr. Trichet said Europe was particularly challenged by its governance problems. Responding to questions by policy makers such as World Bank President Robert Zoellick worried by Europe’s ongoing debt crisis, he cautioned that overhauling the continent’s institutions is a “complex process… we’re observing history in the making.”
Fears have recently grown that Europe could be the source of another major global financial shock similar to the Lehman Brothers Holdings default in 2008 that sparked the financial crisis. Many believe the half-measures taken by European policy makers could lead the debt situation in the euro zone to become a full-blow banking crisis. European banks in solid economies like France and Germany are vulnerable because they hold sovereign debt of countries close to default like Greece.
Mr. Trichet urged governments around the 17-country euro zone to move decisively in implementing the crisis-fighting measures agreed by European leaders in July. Those measures, including a stronger bail-out fund to help troubled countries, still need to be approved by some countries’ parliaments.
Turning to concerns about Europe’s banks, Trichet said lenders should move to reinforce their balance sheet. But he dismessed worries about a liquidity crisis, saying the extraordinary ECB lending doesn’t make that possible.
Just before Mr. Trichet, International Monetary Fund Managing Director Christine Lagarde had a similar message for the audience Saturday: Risks to the global economy are rising and countries must be quick in adopting the right policy mix to ensure a continued recovery, she said.
The new IMF chief, a former French finance minister, said monetary policy should remain easy because the risks of recession are greater than inflation risks. Ms. Lagarde’s remarks appeared targeted at, among others, Jean-Claude Trichet. The European Central Bank has raised rates twice in the past four months, most recently a one-quarter point increase to 1.5% in its key short-term rate in July.
Mr. Trichet gave no indication he was thinking about reversing course on interest rates any time soon, saying that the anchoring of inflation expectations was one of Europe’s “major assets.”
Source: http://blogs.wsj.com
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