Trichet says eurozone breakup fears 'unfounded'

European Central Bank head Jean-Claude Trichet said on Wednesday that fears the eurozone might break up under the strains of the global financial crisis were "unfounded." Asked in the European Parliament about fears that the turmoil could force the 16-member eurozone to split, Trichet said, "I think these rumours are unfounded about the euro."
He said that all currencies were under pressure due to the economic crisis and that all currencies were "undergoing a test." Nevertheless, he said, "I would tell you that obviously the euro and the eurozone has shown resilience and resistance in this crisis."
Trichet expressed optimism that the euro area economy would pick up next year after what he predicted would be a difficult year in 2009. "After a year 2009 that we see as a year of great slowing down and difficulty in terms of growth, we see 2010 as the year of going back to positive figures, picking up after difficult years 2008 and 2009," he said. He added, "this observation seems to me valid for the euro area economy as it seems to me valid for the global economy as a whole ... it seems to me that 2010 could be the year of the pickup."
Trichet said that countries should be allowed to use fiscal stimulus packages to stave off recession, but they must nonetheless stick to EU rules that limit public deficits to three percent of gross domestic product. It was all the more important in the current economic climate that governments respect the EU's Stability and Growth Pact, Trichet said, adding he was "not particularly worried" that deficits were spiralling out of control.
In any case, ballooning public deficits are not something that should call into question the continued existence of the euro area, the ECB chief added. Governments around Europe have recently launched multi-billion-euro fiscal stimulus packages in a bid to give a much-needed shot in the arm to their ailing economies. Trichet also dismissed the idea of a so-called "global bad bank" to take on toxic assets from struggling banks around the world.
"I'm not considering that a global bad bank would be an appropriate concept," he said. Trichet was responding to concerns among some economists that a widening difference in credit ratings on debt issued by governments to fund their stimulus spending, could sharply raise strains within the eurozone.