As the credit crisis worsens, the head of the European Central Bank is urging the private sector to play an "essential role" in helping to end the worst crisis in the global economy since World War II.
Coordinated action is crucial to reestablishing economic stability, ECB cheif Trichert said
For the first time since World War Two the heart of finance of industrialized countries is being threatened by an economic crisis, ECB chief Jean-Claude Trichet told Britain's Sky News television on Wednesday, Nov. 19.
"The world financial powers are all in the same boat," Trichet said, adding that joint efforts will have to be made to bring stability to world markets.
He added that the fallout was "solvable by joint efforts of authorities and certainly central banks, governments and also the private sector has an essential role to play of course to get out of that situation."
The ECB head noted that the weekend's G20 financial summit has given "a lot of impetus to speed up the process, and to be as active as possible in implementing what is necessary."
G20 members met for a summit in Washington
The ECB has been providing large amounts of cash to euro-zone banks to enable them to lend to each other again following weeks of uncertainty that dried markets. In its most recent move, the ECB cut its key lending rate by 0.50 percentage points to 3.25 percent to bolster the 15-nation euro zone, which had entered recession for the first time after shrinking in the second and third quarters of 2008.
Meanwhile, economists are expecting the recession to last longer and have a stronger impact than they had originally predicted. Analysts foresee further interest rate cuts by the ECB.
Earlier this week, following a speech at the Royal Institute of International Affairs in London, Trichet was cautious when commenting on euro-zone developments.
"I don't see yet trends of deflation in the euro area," he said.
Deflation is characterized by a general fall in prices and the money supply, while inflation is a rise in the general level of prices of goods and services in an economy over a period of time.