The European Central Bank has been able to prevent deflation in Europe due to its 'solid anchoring' of expectations on price stability, its president Jean-Claude Trichet said in an interview published today.
Mr Trichet was also quoted as saying banks should not try to pay back state aid just to avoid the conditions imposed by governments when they bailed out the institutions during the financial crisis.
"We have managed to avoid deflation risks from becoming a reality, thanks to solid anchoring of inflation expectations," Financieele Dagblad.
"The global financial system was too fragile," Mr Trichet was quoted as saying when asked about lessons learned from the past five years. "The lack of resilience cost us dearly. If you look at the interplay between the financial sector and real economy, the whole system -- financial and non-financial -- was extremely fragile. Everything in the system needs to be improved.
Mr Trichet said that economic improvement has not been rapid, when considering unemployment data.
He also told the newspaper commercial banks should not try pay back state aid to avoid the conditions put forward by the public sector.
"If paying back is done only to avoid the constraints that the taxpayer would propose, it doesn't seem to me to be very healthy," Mr Trichet said.
Banks should instead concentrate on doing their job of lending to the real economy, he said.
He also told the newspaper there might be supply constraints in credit availability, in addition to lower demand for loans.
Reuters