EUROPEAN Central Bank (ECB) President Jean-Claude Trichet expressed his fullest support yesterday for the statements made in the past few days by Cyprus’ Central Bank (CCB) Governor Athanasios Orphanides.
Trichet stressed that any delay in cutting government expenditure cannot be allowed. He further emphasised that cost-cutting is essential to consolidate the fragile recovery of the Cyprus economy.
Speaking at the close of the first day of the Sixth High-level Eurosystem Seminar with Mediterranean Countries’ Central Banks held in Paphos, he said that the main objects of the conference lay in relation building between the central banks of the area, and in discussing monetary policy issues. Countries from both the north and south of the Mediterranean joined with EU states from the region to discuss challenges and exchange rate policies in the region, and to draw lessons from the economic and financial crisis of the past two years. Countries as far afield as Nigeria, Croatia, Syria and other Middle Eastern countries are participating.
Trichet stated that at the end of the first day of the conference all participants agreed that prudence in management is required and that no quick-fix solutions are available.
Trade in the southern Mediterranean area includes developing as well as developed economies. The former proved to be more resistant to the crisis than their northern Mediterranean counterparts, who experienced a full-blown recession. Although the growth rates of the developing countries were also negatively affected due to the crisis, they contribute significantly to the economic health of the eurozone.
On a question about the threat to the independence of some central banks in the area, Trichet affirmed that ECB independence is not threatened by proposed changes to the Lisbon Treaty. Its independence is guaranteed under the Maastricht Treaty. Similarly, he stressed that the independence of none of the participating countries’ central banks is under any threat.
Trichet remarked that one of the greatest achievements of the ECB was that it had accomplished a very high degree of price stability in the eurozone area. In fact, the achievement of price stability in the eurozone over the past ten years has been the best in over 50 years. Managing inflation effectively remains the primary function of a central bank, and therefore this is indeed a remarkable achievement.
The ECB has adjusted expected growth in the eurozone upwards by 0,7 per cent in September. This remains quite modest and depends on the continuing consolidation of investor confidence.
Trichet has been called back to Brussels to meet with EU heads of state and will not be attending any further proceedings of the seminar in Paphos which ends today.
