The euro area economy is showing signs of stabilisation, but it would be premature to declare the crisis over, European Central Bank President Jean-Claude Trichet told the European Parliament’s economics committee on September 28 2009.
 
According to a European Parliament record of the meeting, MEPs asked Trichet how the proposed Systemic Risk Board would work and how to ensure the supply of credit to businesses.
 
"Now is not the time to exit," Trichet said in reference to the non-standard measures the ECB has been using to support the financial system.
 
However, he said, it was not possible to maintain this strong intervention in the euro area money market for ever.
 
"The ECB has an exit strategy and stands ready to put it into action when the appropriate time comes."

At the G20 summit in Pittsburgh on September 24 and 25 2009, it was agreed that economic stimulus efforts would continue and that finance ministers would come up with co-ordinated exit strategies for stimulus moves at the right time.
 
As there are signs of stabilisation, the ECB is expecting to see in the months ahead "a very gradual recovery", but still, this expectation remains uncertain, Trichet said.
 
Regarding the proposal to create a European Systemic Risk Board to warn of potential future crises ahead of time, Trichet said: "it is the right step to set up a body specifically responsible for the macro-prudential oversight at the European level".
 
The board would have close links with the ECB, he said.
 
MEPs asked for more details of the role and powers of this Board, and how it would ensure its recommendations would be followed by EU member states. 
 
The role of the council would be to identify risks and give recommendations but not to decide in the place of other authorities, Trichet said.
 
"We have a strong moral suasion but no substitution to other responsibilities," he said.
 
According to Trichet, on both sides of the Atlantic there is a "great deal of agreement in terms of fact that failing in maintaining price stability would be destabilising".
 
Of his own responsibilities, Trichet said: "We will apply the Treaty (…) and guarantee price stability. You can count on us."
 
He said that focussing the ECB’s "non-conventional" measures on banks was helping SMEs, as they relied principally on banks as a source of credit rather than being able to go direct to the markets.
 
Responding to questions on future eurozone enlargement and any possible change of the Maastricht criteria, Trichet said that the enlargement of the zone "is not a closed chapter".
 
"I think we should continue and we will continue (…) but you have the criteria and they have to be met," he said.
 
"When we say we need to stick to criteria, we are only repeating what is said by the (European) Commission and most countries concerned," Trichet said.