European credit crunch going global, central banker Jean-Claude Trichet warns

THE central banker at the heart of the euro zone storm has warned that the region's troubles are symptomatic of the economic malaise of Western nations.

Jean-Claude Trichet, president of the European Central Bank, told The Times of London yesterday the sovereign debt threats are "not only a euro area issue, but have a European aspect and a global aspect".

"We were not at ease with the idea that, in the heat of the crisis, all countries were called on to spend as much as possible, embark on deficits as much as possible," he said. "I believe the tensions we are observing in Europe today are part of a much more global phenomenon."

Mr Trichet's words came amid financial market turmoil and political chaos in Greece. World markets and Western governments fear Greece will be unable to service its E340 billion ($457bn) debt and that the country has become effectively ungovernable.

Shares dived to three-month depths around the world, and the euro slid to a new record low against the Swiss franc over fears a collapse could trigger a new global financial crisis.

The ECB chief warned against a debt default by Greece, and insisted no officials had raised the prospect of troubled euro members, including Portugal and Ireland, leaving the bloc.

He said the euro zone should be judged as a whole. "A bird's-eye view of the euro area gives elements that are rather encouraging and often not perceived," Mr Trichet said.

Adding to the crisis fears, an Irish minister said private lenders to the stricken Anglo Irish Bank and Irish Nationwide Building Society should share some of the losses suffered by taxpayers.

The centre of the crisis remained Greece, where Prime Minister George Papandreou was struggling to quell revolt against his austerity measures. His country has the lowest credit rating of any in the world, according to Standard & Poor's, over concerns of a default on its national debt.

The Australian


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