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European Central Bank says eurozone countries must slash deficits

The head of the European Central Bank, Jean-Claude Trichet, says the 16 members of the eurozone must reduce their deficits by 2011.

Jean-Claude Trichet

Trichet says banks should provide more credit to the economy

European Central Bank President Jean-Claude Trichet has urged the 16 members of the eurozone to slash their deficits by 2011. In an interview with the German newspaper Bild, he said budget deficits in countries using the euro "should be reduced in 2011 at the latest, in some countries already in 2010, to preserve faith in state finances."

Trichet also called on banks to ease a credit crunch by making loans readily available. "Banks must live up to their central role in providing credit to the economy," he said.

More debt next year

Greece currently has the largest amount of debt in the eurozone at an estimated 300 billion euros. The country saw its sovereign credit rating go down this month due to ballooning public deficit and debt. Athens' public deficit is likely to rise to 12.7 percent of output this year, which far exceeds the limit of 3 percent for eurozone countries.

Meanwhile, Germany is expected to have an additional 85.8 billion euros in new debt, due to its recently approved budget for 2010. The government has said it will produce a major savings plan by mid-2010 to put the country back on the path of fiscal health.

Germany aims to reduce the structural deficit from 2011 by about 10 billion euros per year.

Editor: Andreas Illmer

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