European Central Bank rules out high inflation risk in EU region



Ruling out any inflationary pressure in the EU single currency region, European Central Bank President Jean-Claude Trichet said the Euro will remain a stable currency in the foreseeable future.

Trichet made this comment over recent reports suggesting inflation in euro zone has climbed to 2.2 percent, exceeding expectations for the first time in two years. Data available from Economic Cycle Research Institute showed that due to surge in economic activity in France and Germany, inflationary pressures had built up in November and December to a 25 month high.

“Europe has not become an inflation community and it won’t become one”, Trichet said while addressing a Bavarian Conservative Party event in southern Germany.

“The euro is a stable currency, as stable as its most stable predecessor currencies, including the D-Mark”, he said dismissing any chances of revaluation in the near future.

Euro zone’s biggest member Germany’s labour minister had said earlier this week that wages may go up ‘considerably’ this year over anticipated inflation.

There is a huge disparity in the eurozone with booming Germany witnessing inflationary undercurrents while peripheral member like Spain, Portugal, Greece and Ireland facing sovereign debt crisis. The ECB however, managed to hold the rates at 1.0 percent for 19 straight months.

Trichet underlined the need for strict financial discipline and urged governments to narrow down their deficits.

“We have to make a quantum leap in our economic governance,” he urged saying “It is time to strengthen the code of conduct for national governments, notably the Stability and Growth Pact”.

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