By Jean-Baptiste Vey and Lionel Laurent
AIX-EN-PROVENCE, France, July 4 (Reuters) - Budget cuts and structural reforms will help cement Europe's economic recovery, while bank stress tests will help restore confidence, European Central Bank President Jean-Claude Trichet said on Sunday.
He said he did 'not believe at all' that Europe was facing a double-dip recession as markets took fright from weak data such as the U.S. jobs report on Friday.
Trichet said there was a 'huge' amount of work to do for the Group of 20 powers to regulate the financial sector and that the reduction of global economic imbalances had yet to be completed.
'We see structural reforms as fundamental if we want to increase the economic growth potential of Europe,' he told reporters on the sidelines of an economic conference in Aix-en-Provence.
Trichet was speaking ahead of an interest-rate decision due this week by the ECB, which is likely to keep rates at 1 percent until at least the second half of 2011 amid signs of a slowing euro zone economy and intensifying austerity measures.
Government austerity drives and deficit cuts would not choke growth but rather restore confidence, he said, and repeated his opposition to Europe-wide debt issuance to spur growth.
'I have no positive view of such an idea. We are in a period where we have to manage very carefully all the budgets,' he said.
He said budget policies needed to be finely balanced to boost confidence.
'(For) durable growth that is sustainable in the long term you must strengthen confidence, and that means having budgetary policies that are balanced and sustainable in the eyes of everyone,' Trichet said.
Plans to stress-test European banks would also be an 'important element' in restoring market confidence, he added.
BUDGET FOCUS
Trichet reiterated his call to strengthen budgetary surveillance rules under the European Stability and Growth Pact as much as possible, especially where sanctions were concerned, before envisaging changes to the treaty.
'There could later be a change in the treaty, but first, within the framework of the current treaty, we need to do the maximum on strengthening prevention, on sanctions ... That is all very important,' he said.
He said indicators of competitiveness should be monitored as well as budget deficit levels.
Trichet said he was confident in Europe's ability to bounce back judging by the record of the euro over the past 11 years and the recent rescue packages agreed over the Greek crisis.
'Europe has an ability to confront challenges that is above expectations,' said Trichet, citing the 440 billion-euro financial safety net of debt guarantees agreed by euro zone states in May.
(Additional reporting by Matthias Blamont, Editing by Marcel Michelson and Will Waterman) Keywords: ECB/TRICHET XX:SU:REUTERS#SN:nLDE6630A9#XX:1391400.0#HS:RAMSTXT_9088_2010-7-4_135334_0_184#DU:lanreunxd1+lanreznxd1+rekwire+reawire+rexwire+reewire+bsu8rtr+bsu8rtr#XN:##XP:tfukfipdista.datastream.com ~ (marcel.michelson@thomsonreuters.com; +33 1 4949 5130; Reuters Messaging: marcel.michelson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
AIX-EN-PROVENCE, France, July 4 (Reuters) - Budget cuts and structural reforms will help cement Europe's economic recovery, while bank stress tests will help restore confidence, European Central Bank President Jean-Claude Trichet said on Sunday.
He said he did 'not believe at all' that Europe was facing a double-dip recession as markets took fright from weak data such as the U.S. jobs report on Friday.
Trichet said there was a 'huge' amount of work to do for the Group of 20 powers to regulate the financial sector and that the reduction of global economic imbalances had yet to be completed.
'We see structural reforms as fundamental if we want to increase the economic growth potential of Europe,' he told reporters on the sidelines of an economic conference in Aix-en-Provence.
Trichet was speaking ahead of an interest-rate decision due this week by the ECB, which is likely to keep rates at 1 percent until at least the second half of 2011 amid signs of a slowing euro zone economy and intensifying austerity measures.
Government austerity drives and deficit cuts would not choke growth but rather restore confidence, he said, and repeated his opposition to Europe-wide debt issuance to spur growth.
'I have no positive view of such an idea. We are in a period where we have to manage very carefully all the budgets,' he said.
He said budget policies needed to be finely balanced to boost confidence.
'(For) durable growth that is sustainable in the long term you must strengthen confidence, and that means having budgetary policies that are balanced and sustainable in the eyes of everyone,' Trichet said.
Plans to stress-test European banks would also be an 'important element' in restoring market confidence, he added.
BUDGET FOCUS
Trichet reiterated his call to strengthen budgetary surveillance rules under the European Stability and Growth Pact as much as possible, especially where sanctions were concerned, before envisaging changes to the treaty.
'There could later be a change in the treaty, but first, within the framework of the current treaty, we need to do the maximum on strengthening prevention, on sanctions ... That is all very important,' he said.
He said indicators of competitiveness should be monitored as well as budget deficit levels.
Trichet said he was confident in Europe's ability to bounce back judging by the record of the euro over the past 11 years and the recent rescue packages agreed over the Greek crisis.
'Europe has an ability to confront challenges that is above expectations,' said Trichet, citing the 440 billion-euro financial safety net of debt guarantees agreed by euro zone states in May.
(Additional reporting by Matthias Blamont, Editing by Marcel Michelson and Will Waterman) Keywords: ECB/TRICHET XX:SU:REUTERS#SN:nLDE6630A9#XX:1391400.0#HS:RAMSTXT_9088_2010-7-4_135334_0_184#DU:lanreunxd1+lanreznxd1+rekwire+reawire+rexwire+reewire+bsu8rtr+bsu8rtr#XN:##XP:tfukfipdista.datastream.com ~ (marcel.michelson@thomsonreuters.com; +33 1 4949 5130; Reuters Messaging: marcel.michelson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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