Trichet: European economy 'in deepest crisis since World War II'

Europe’s economy is in its deepest crisis since the Second World War, or even the First World War, the president of the European Central Bank was today quoted as saying.

German news weekly Der Spiegel reported that Jean-Claude Trichet said that since the beginning of the financial crisis in 2008 “we have experienced and we are experiencing really dramatic times.”

Trichet was quoted as saying there was no doubt the economy “is in its most difficult situation since the Second World War or perhaps even since the First World War”.

In an interview to be published Monday, Trichet said the recent exacerbation of the eurozone’s debt crisis had provoked a market reaction similar to that at the height of the global financial crisis in 2008.

“The markets didn’t function any more, it was almost like in the wake of the Lehman (Brothers) bankruptcy in September 2008,” he was quoted as saying.

Even though European leaders last weekend agreed on rescue measures including a €750bn loan guarantee package for troubled eurozone nations, Trichet urged further action to address the crisis’ underlying problems.

The ECB’s president called for a “quantum leap” in control of financial and economic policy across the 16-nation currency zone, the magazine reported.

“We need improved structures, to avoid and sanction wrongdoing,” Trichet was quoted as saying. “We need an effective implementation of the mutual control, we need effective sanctions for breaches of the stability and growth pact.”

In the wake of Greece’s debt crisis, the euro has come under intense pressure, especially with fears that it will spread to other heavily indebted eurozone countries.

Trichet urged European leaders to accelerate the consolidation of their deficits. “They know what is at stake,” he was quoted as saying.

Meanwhile, the European Union’s energy commissioner also cautioned that the euro’s crisis wasn’t over yet.

Pointing to the recent rescue measures, Guenther Oettinger told German daily Tagesspiegel: “We have won time with the past days’ decisions, but haven’t decided the battle’s outcome yet.”

The top priority for the eurozone’s nations now must be to move ahead on deficit reduction, the former German state governor was quoted as saying.