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| ECB chief says finance exit strategy set, markets must wait |
| AFP/PTI / Frankfurt Sep 04, 2009, 17:47 IST |
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European Central Bank (ECB) President Jean-Claude Trichet said today it was too soon to declare the financial crisis over and that exceptional ECB credit support measures would remain in place for now.
Speaking a day after the bank left its key interest rate unchanged at a historic low of 1.0 per cent, Trichet addressed the issue of "exit strategies," or when it would begin to unwind extraordinary steps taken over the past two years.
It was "too soon to call the crisis over", he told analysts gathered in Frankfurt, while also making clear that at some point "financial institutions ultimately need to stand on their own two feet".
The ECB has slashed interest rates, loaned unlimited amounts of cash to banks for periods of up to one year and launched a programme to buy low-risk corporate bonds to unblock a key eurozone financial market.
Markets now want to know when the bank will begin to undo its exceptional measures, but Trichet emphasised that "we will unwind these measures when the situation returns to normal and the rationale for the measures fades away".
The programme of what the ECB prefers to call "enhanced credit support" has helped to buffer the eurozone from global financial turmoil, but the 16-nation economy nonetheless fell into recession for the first time since its creation in 1999.
After contracting by a modest 0.1 per cent in the second quarter of this year, however, the zone appears set to post growth in the following three months.
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