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ECB chief plays down risk of global recession
Central banks stand ready to provide liquidity to banks, European Central Bank chief Jean-Claude Trichet said Monday, playing down fears of a global recession. Trichet also called on the Greek government to deliver on its austerity commitments.
REUTERS - Economic growth is slowing but there is no sign of a worldwide recession, according to global central bankers who said on Monday they had no plans for concerted action.
Central banks stood ready to provide liquidity as needed and there was no sign of deflation in developed economies, Jean-Claude Trichet, speaking as chair of talks at a Bank for International Settlements meeting, also said.
“We don’t see a recession on the cards at all but we see a slowing down in comparison to what has been observed in the recent period,” Trichet told journalists at a news conference.
“We see also downside risks in a degree of slowing down in the global economy have augmented during the recent period.”
Equity markets tumbled on Monday, with European shares sinking to a 26-month low, partly in reaction to the failure over the weekend of the Group of Seven industrialised nations finance ministers to come up with more than a stated commitment to help turn the world economy around.
Fears about a Greek default have risen after senior politicians in German Chancellor Angela Merkel’s centre-right coalition started talking openly about it.
The resignation of European Central Bank policymaker Juergen Stark has added to signs of division among top policymakers on how to tackle the problem while Greece has said it has cash for only a few more weeks.
ECB chief Trichet called on decision-makers to implement rapidly and comprehensively decisions that had already been taken, including the July 21 move to provide Greece with a second bailout.
International lenders threatened last week to withhold the sixth bailout payment of about 8 billion euros ($11 million) because of Greece’s repeated fiscal slippage. Trichet said it the working assumption was that Greece would satisfy EU and IMF inspectors.
“All institutions are calling on the Greek government to fully deliver on its commitments,” Trichet said.
The Swiss franc has soared some 20 percent against the euro in recent months as investors worried about the euro zone debt crisis seek a safe haven, prompting the Swiss National Bank to implement a cap on the Swiss franc against the euro to cushion the Alpine economy.
When asked about whether the SNB’s decision to cap the franc at 1.20 per euro had been discussed, Trichet answered: “There was explanation and I would say understanding by the global economy meeting.”