Wednesday, January 21, 2009

Lessons in credibility...

...or the lack thereof.

The below remarks by Mr. Trichet (who has been less than prescient concerning the scope, severity, trajectory, and solubility of the crisis in the EU) are laughable.

Re-defining economic terms does not escape the problem...nor does it serve to convince anyone that a united pan-European solution will present itself.

European Central Bank President Jean-Claude Trichet played down the threat of deflation and said suggestions that countries could leave the euro zone in wake of the financial crisis were "unfounded".

"There is presently no threat of deflation," Trichet told a committee of the European Parliament on Wednesday.

"We are currently witnessing is a process of disinflation, driven in particular by a sharp decline in commodity prices." "It is a welcome development," he said, adding that the fall in energy, and other prices should help boost struggling economies.

The ECB chief also rebuffed suggestions that some countries may be looking to quit the euro zone after the recent financial turmoil.

"I think these rumors are unfounded about the euro," he said.

With the global financial crisis forcing governments to pump money into rescue and economic stimulus packages, question marks have been raised over their ability to pay for the plans.

Markets have begun pricing in the once the unthinkable -- that the euro zone might break up.

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