VIENNA (MNI) – An eventual understanding by markets of the full
importance of the decisions taken recently by governments will be
decisive in restoring the normal functioning of those markets, European
Central Bank President Jean-Claude Trichet said Monday.

Speaking to reporters following his speech at a conference of the
Austrian National Bank, Trichet declined to label recent foreign
exchange moves of the euro “brutal,” instead calling the single currency
credible.

Asked about additional measures authorities could take to reassure
markets, Trichet replied: “I think it is much more the fact that the
markets did not, perhaps, fully incorporate the decisions that have been
taken by governments both in terms of accelerating their consolidation,
which is a very important commitment…and in terms of demonstrating
that they were standing ready to support countries of the euro area.”

The additional budget cutting efforts countries have undertaken
were “not anticipated as far as I understand by markets…and it takes a
little time for them to realize that this decision has been taken,” he
continued.

“What we expect is, of course, that the decisions taken by
governments and the full understanding by markets that they are going
back to a sustainable situation will by itself play a decisive role in
going back to a normal functioning of markets that were disrupted,”
Trichet added.

It is “very, very important” for countries that are “not fully
credible” with respect to their fiscal situations to get to a position
of medium-term fiscal sustainability, Trichet urged.

“I think it is fully in line with consolidating the recovery,
because medium-term sustainability improves confidence, and confidence
is the ingredient which is most important” for households, companies and
investors, he said.

Asked whether he would concur that recent foreign exchange moves
have been “brutal,” Trichet avoided a direct response. “I would say that
the euro is a credible currency and I would also say that the euro…is
keeping its value in a remarkable fashion. The track record is
remarkable, and it is of course a very important asset for domestic and
external investors.”

–Frankfurt bureau tel.: +49-69 720142. Email: dbarwick@marketnews.com

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