Trichet urges EU nations to work together


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The Independent Online

The president of the European Central Bank, Jean-Claude Trichet, used one of the last major speeches of his tenure as a rejoinder to American traders and economists predicting the break-up of the eurozone.

Side-stepping more pressing issues of how the ECB is responding to the continent's sovereign debt crisis, Mr Trichet told fellow central bankers in Jackson Hole, Wyoming, that the US, too, was a regionally diverse economy held together under a single currency.

However, he did call on European lawmakers to pursue structural reforms to strengthen their countries' economies and to improve collective decision-making. "As a group, as an entity, we are challenged paradoxically not because our fundamentals are very bad," he said. "Our fundamentals are not very bad. The problem is that we are challenged in our governance.

"Greece, Portugal and Ireland, in particular, had progressively lost competitiveness vis-à-vis their main trading partners in the euro area," Mr Trichet said. "Germany is now an example of how big the dividends of reform can be if structural adjustment is made a strategic priority and implemented with sufficient patience."

Mr Trichet presented ECB research showing how different regional economies within the US have performed markedly differently since the credit crisis, with poor performance concentrated – as in Europe – in regions which had housing bubbles or were uncompetitive before the crisis.

Financial markets have been watching the annual Jackson Hole symposium more closely than usual this year, expecting new policy announcements from Mr Trichet and his US counterpart, Ben Bernanke, but both men disappointed that worldwide audience.

On Friday, Mr Bernanke gave no new hints of easier monetary policy by the Fed. Mr Trichet did not address the ECB's programme of bond buying aimed at bringing down interest rates for the Spanish and Italian governments.