Trichet Urges Governments to Curb Spending, Deficits
European Central Bank President Jean-Claude Trichet urged euro-area governments to trim their budget deficits after a flood of spending aimed at stemming the worst recession since World War II.
“There is too much spending, there is a need to reduce spending as a proportion of gross domestic product,” Trichet told French TV channel LCI in an interview today.
Governments have passed stimulus programs to spur economic growth, swelling deficits beyond limits designed to give fiscal discipline to the 16-nation euro region. The ECB has cut its benchmark interest rate to a record low of 1 percent, flooded the market with billions of euros and started buying 60 billion euros ($84 billion) of covered bonds to stem the recession.
“Because the situation is extremely difficult, at the moment we have a significant increase of deficit and therefore, inevitably, of debt,” Trichet said online payday loans.
The ECB expects the euro-area economy to shrink about 4.6 percent this year before returning to growth by mid-2010.
Pulling out of the slump is “above all a confidence problem, not a solvency problem,” Trichet said. “What we want, naturally, is to reinforce confidence” and help the recovery, he added.
Trichet declined to comment on France’s borrowing plans.
“The ECB doesn’t pronounce itself on the borrowing policies of the different states,” he said. “It’s up to them to see to the best means for preserving their budgetary health and, above all, minimizing the cost of borrowings.”
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