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Eurozone crisis has reached ’systemic dimension: Jean-Claude Trichet

11 October 2011 15:23 (UTC +04:00)

Baku - APA-Economics. The eurozone debt crisis has reached systemic dimensions, European Central Bank chief Jean-Claude Trichet said Tuesday, calling for rapid and decisive action from governments, Economic Times reported.

"The crisis is systemic and must be tackled decisively," said Trichet, who was speaking in his capacity as head of the European Systemic Risk Board to the European Parliament’s Committee on Economic and Monetary Affairs.

The ESRB was set up by the European Union to identify any emerging problems in Europe’s financial system so that relevant authorities can act correspondingly.

"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond," Trichet said.

"National governments and authorities, as well as European institutions, must rise to the challenge and act together swiftly. Further delays are only contributing to aggravate the situation."

The crisis in sovereign debt has reached global proportions and Europe was at its epicentre, he said, noting problems in the United States and Japan.

"We have to act collectively in order to cope with a systemic crisis of which we are at the epicentre."

Trichet said "clear decisions" were needed from governments on recapitalising the region’s banks and a "clear response" on tackling the crisis.

"The banking sector in Europe needs recapitalisation, that is part of our message," Trichet said.

"Decisions have to be taken and taken very rapidly, I expect this decision to be taken as rapidly as possible."

Eurozone banks have become increasingly wary of lending to each other and are turning increasingly to the ECB for funding.

This is evident from banks’ overnight deposits at the ECB, which shot up to 269 billion euros on Tuesday, the highest since June 2010.