Trichet: Phasing out crisis measures to take time

[September 10, 2010]  BERLIN (AP) -- It may take a while yet to phase out the special credit support that was given to banks in the wake of the financial crisis, the European Central Bank's president has said.

The ECB provides short-term credit to banks to boost their access to cash liquidity and said last week that these measures would stay in place for at least the rest of the year amid fears that the global economic recovery is losing steam.

"As markets gradually stabilise, our non-standard measures ... will continue to be progressively phased out," bank president Jean-Claude Trichet said in an interview with the Financial Times, which was posted on the ECB's website Friday.

"So we are accompanying the market as it progressively goes back to normal," he added. "But ... it is a process which takes time."

Trichet didn't give any more specific timeline.

The ECB has wrapped up its one-year and six-month lending operations. But reflecting its desire to keep money flowing to the banking system in the aftermath of the government debt crisis, it said last week it would stage three-month, fixed-rate tender operations in October, November and December.

It also plans to continue conducting one-week and one-month unlimited funding operations at least through Jan. 18.

Asked what phase the crisis is in, Trichet said that "we are in a situation where central banks in particular, and also other authorities, have to remain alert and have to know that we are in an uncertain universe."

Europe is debating how to strengthen in future the rules that govern the 16-nation euro to ensure that countries comply with requirements to keep their budget deficits in check.

Trichet said he doesn't advocate expelling EU countries that repeatedly breach the rules -- "but a temporary suspension of voting rights is something that should be explored."

The ECB said the interview was conducted on Wednesday.

[Associated Press]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.