ROME (MNI) – Today’s lower-than-expected allotment in the European
Central Bank’s three-month refinancing operation was part of the orderly
transition expected and intended by the European Central Bank, ECB
President Jean-Claude Trichet said Wednesday.

Referring to the various measures the ECB is relying on to manage
liquidity, Trichet said, “all this in our view has been designed to
permit as orderly as possibly a transition and it is what we think will
come.”

He was speaking at a press conference following a seminar with Gulf
state central bankers and Eurozone national central bank governors.

Trichet noted that “some market observers” considered today’s
result “very good,” while it was seen as “somewhat lower than expected”
by other analysts. It is part of the “normal transition we had in mind”
and for which the ECB’s “combination of operations” has been designed,
he asserted.

On the stress-testing of European banks, Trichet said the scope of
the exercize “will cover more than 26 [banks] and it is based upon the
fact that in each [economy] the idea is to be able to represent a
percentage of the overall centers that would be significant.”

Declining to provide an exact figure, he added that the number of
banks tested “will be significantly more than 26.” Reports out of
Brussels late last week said EU officials had agreed to test as many as
160 banks.

Trichet disputed the idea that markets had reacted with
disappointment to the G-20 summit, at which leaders agreed to halve
deficits by 2013. “Not that fiscal consolidation would hamper growth in
any respect,” he added. The opposite is true, he maintained, arguing
that a return of confidence induced by more fiscal discipline was
important for the economy.

–David Barwick, +49-173-315-6588; dbarwick@marketnews.com

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