The European Central Bank (ECB) has done all it could to halt the spread of the European debt crisis and protect the financial system, and now it's up to governments to do their part, outgoing ECB President Jean-Claude Trichet says. "I think that the ECB has done all it could to be up to its responsibilities in exceptional circumstances…The ultimate backstop is, of course, the governments. To do anything that would let governments off their responsibilities would be a recipe for failure,” Trichet tells the Financial Times. Further economic integration among eurozone countries will be needed to end the current crisis and prevent new ones, says Trichet, whose eight-year terms ends later this month. "I think that we are experiencing history in the making. My sense is that no country, no individual, no leader will take the responsibility of going backwards. That’s the reason why I am confident." Europe remains at risk of falling back into recession in wake of the debt crisis, caused by fears that Greece may default and take the continent's financial system down with it. The ECB has cut interest rates and held them at 1.5 percent and some European monetary authorities say there should be no rush to raise them, as inflation remains at bay. "I expect inflation to drop below 2 percent next year," says Jozef Makuch, Slovakia's central bank chief, according to Reuters. "Negative gross domestic product can't be ruled out if downside risks materialize." 
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Saturday, October 15, 2011
The European Central Bank (ECB) has done all it could to halt the spread of the European debt crisis and protect the financial system, and now it's up to governments to do their part, outgoing ECB President Jean-Claude Trichet says. "I think that the ECB has done all it could to be up to its responsibilities in exceptional circumstances…The ultimate backstop is, of course, the governments. To do anything that would let governments off their responsibilities would be a recipe for failure,” Trichet tells the Financial Times. Further economic integration among eurozone countries will be needed to end the current crisis and prevent new ones, says Trichet, whose eight-year terms ends later this month. "I think that we are experiencing history in the making. My sense is that no country, no individual, no leader will take the responsibility of going backwards. That’s the reason why I am confident." Europe remains at risk of falling back into recession in wake of the debt crisis, caused by fears that Greece may default and take the continent's financial system down with it. The ECB has cut interest rates and held them at 1.5 percent and some European monetary authorities say there should be no rush to raise them, as inflation remains at bay. "I expect inflation to drop below 2 percent next year," says Jozef Makuch, Slovakia's central bank chief, according to Reuters. "Negative gross domestic product can't be ruled out if downside risks materialize." 
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G-20 officials also agreed that developing economies with large trade surpluses should continue their efforts to make their exchange rates more flexible.
This largely reflects frustration by other countries, notably the U.S., about China's control over the exchange rate of the yuan, which critics say is undervalued to benefit Chinese exporters at the expense of U.S. workers and firms.
The U.S. Senate recently passed a bill targeting Beijing's currency policy, and China has hit back, calling on Washington to stop politicizing economic issues and warning that the bill could start a trade war.
The People's Bank of China said Wednesday that the yuan isn't undervalued and is nearing a "balanced and reasonable level."
The problems around euro governments' finances dominated Saturday's talks in Paris between G20 finance ministers and central bank governors, with the Chancellor warning the world expects the euro nations to deliver an "impressive" response within days.
Only three members of the eurozone – Germany, France and Italy – belong to the G20 group, but the joint resolution delivered in Saturday's "communique" document will shape the agenda for a meeting of eurozone ministers next weekend.
The October 23 meeting must "decisively address the current challenges through a comprehensive plan," it said, strong language echoed by Francois Baroin, the French finance minister, who hosted delegates.
Markets are hoping that it prove a turning point in the region's debt crisis, which has dragged on unresolved for two years. It this month claimed its first scalp in the banking sector as Dexia, the Franco-Belgian lender, had to be guaranteed by the states involved.
George Osborne, the Chancellor, said earlier that his eurozone colleagues "will have left Paris under no misunderstanding that there is a huge amount of pressure on them to deliver a solution to the crisis".
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