FRANKFURT (MNI) – The solution to the problems facing Greece should
under no circumstances include any credit event or default, European
Central Bank President Jean-Claude Trichet said in an interview released
Thursday, reiterating the concern he has expressed repeatedly in recent

Trichet told The Times of London that it is “not advisable” for
authorities “to embark on a compulsory way of dealing with” the Greek

“We are telling them that doing anything that would create a credit
event or selective default or default is not advisable,” he emphasized.

While making it clear that the decision rests with national
governments of the Eurozone, Trichet also observed pointedly that once
the decision has been made, the ECB “will take all the appropriate
decisions ourselves as far as the Eurosystem is concerned, in line with
our statutory obligations.”

“But again, we are saying very clearly that they should avoid
compulsion, a credit event, or selective default or default. Our
position is clear,” he added, declining all further comment when asked
about the possibility of a compromise.

Senior ECB officials have warned recently that the central bank
would not be able to accept Greek bonds as collateral in refinancing
operations were they to be considered in default. This, they have noted,
could lead to a virtual collapse of the Greek banking system.

As to the idea of Greece, Ireland or Portugal withdrawing from the
common currency, Trichet said it was “not a working assumption that
anybody considers.” He said that nobody in an official position had ever
raised the possibility with him.

Trichet declined as always to comment on the monetary policy of
other central banks.

“What I would say is that in our case it is very important that we
continue to anchor very solidly inflation expectations,” he said. “We
consider that such anchoring has been a very important element in the
way we went through the crisis; we avoided not only the materialisation
of inflation risks in normal times but, in these exceptionally difficult
times since the intensification of the crisis in 2008, also the
materialisation of deflationary risks.”

It is “very important” to consider that despite the euro area’s
problems, there are “elements that are rather encouraging and which are
often not perceived,” he said. He cited debt and deficit ratios that are
lower for the Eurozone as a whole than for the U.S. and Japan, as well
as a balanced current account and “rather encouraging” growth since 3Q
of 2009.

The euro “is credible” and as a stable currency is “undoubtedly a
success,” he asserted. However, if monetary union has an impressive
track record, economic union must be “improved considerably,” he urged,
calling stronger surveillance of national economic policies “the big

–Frankfurt bureau tel.: +49-69-720142. Email:

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