ECB head favors exit of some measures | Shanghai Daily

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November 21, 2009

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ECB head favors exit of some measures

ALTHOUGH it is too early to say the crisis is over, it is time to withdraw some of the policy measures that supported the financial system through the credit crunch, the European Central Bank President Jean-Claude Trichet said yesterday.

In a speech at the European Banking Congress in Frankfurt, Trichet likened the financial system to a recovering patient and said it was time to pull back the medicine "if the patient is to get back on its own feet."

He said the ECB would soon be pulling some of its liquidity-providing "extraordinary measures" to ensure they don't cause an inflation threat. The ECB is expected to provide details on how the programs will be scaled back at its December 3 meeting.

He said the financial system had to prove that it could work without the ECB's help, and that policy makers should be wary of repeating the mistakes of the past, when very cheap credit helped create dangerous imbalances and asset bubbles.

"It is surely too early to say the crisis is over," Trichet said, but it's time to look to the future and learn from the past.

Trichet called on banks to make more credit available and to bulk up their reserves with their quarterly profits if necessary. Bonuses, he said, have to be kept in check.

The chief of the central bank for 16 countries that share the euro said taxpayers wouldn't accept another round of bailouts.

"The financial sector can't forget that it's supposed to serve the real economy, and not the other way around."

At the same conference, Germany's Finance Minister Wolfgang Schaeuble warned that while the worst had passed for the German economy, the risks lingered.




 

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