European Central Bank (ECB) President Jean-Claude Trichet rose to the defense of the euro yesterday, describing it as a “credible” currency that was not in crisis.
“I think that we have to see that we have a currency that is credible,” Trichet told RTL radio a day after the ECB backed an extension in special measures to tackle eurozone debt pressures. “There is no crisis for the euro as a currency. We have problems of financial instability that are the result of budget crises in certain European countries.”
The bank on Thursday left its key interest rate at a record low of 1 percent, but said it would extend cheap emergency funding for the commercial banks through the first quarter of next year.
Crucially, the ECB also said it would continue to buy government bonds to help ease pressure on a growing list of financially vulnerable eurozone countries — Belgium, Greece, Ireland, Italy, Portugal and Spain — but gave no indication it would increase its purchases.
Trichet said yesterday the decision to leave interest rates unchanged at 1 percent “is what we think is necessary to continue to provide our fellow citizens ... price stability, which is our mandate.”
While the ECB announced it would keep buying government bonds, a key part of its stimulus measures to support indebted eurozone nations and fight the debt crisis, the chief of the IMF said on Thursday the debt crisis in Europe remained serious, but he tipped Ireland to recover rapidly after its weekend bailout.
On Sunday, the EU and the IMF announced an 85 billion euro (US$111 billion) rescue package for Ireland to shore up its banking sector and enable the country to meet its debt obligations.
“The crisis in Europe is still strong” with Ireland and Greece “at the edge of a cliff” and some other nations are “not far from the edge of the cliff,” IMF managing director Dominique Strauss-Kahn told reporters in New Delhi.
However, the Irish rescue “should fix the problems” and the country’s economy “will come back on track rather rapidly,” he said, adding the IMF stood poised to assist other nations if needed.