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29 Aug, 2011 14:15

Eurozone officials grilled over union’s debt crisis

The President of the European Central Bank has defended Europe's bailout-driven survival efforts, amid widening divisions on managing the debt crisis. A special economic summit in Brussels has focused on halting its spread in the EU.

European Central Bank (ECB) President Jean-Claude Trichet rebuked EU governments for the current instability of the debt markets."The fact that markets are dysfunctional is, in our opinion, the responsibility of governments," he said, as cited by Reuters. "They are issuing their own securities. They have responsibility for the credibility of their own securities."The ECB President also defended the bank's decision to buy Italian, Spanish, Portuguese and Irish bonds after bond yields rocketed earlier this month. Trichet said the bank was the only institution which could react fast enough to threats in the bond markets. He added that the ECB’s bond purchases do not interfere with monetary policy in the eurozone.Trichet says the growth of the euro is continuing at a "modest pace." The bank is reviewing its medium-term inflation outlook for the eurozone. Inflation is expected to remain above the bank's 2% target in the "months ahead," he said.  Jean-Claude Trichet was appearing before the Economics Committee on Monday afternoon to discuss with MEPs the monetary and economic policy issues raised by the situation in the sovereign debt markets.Talks focused on halting the contagion, as fresh data often leads to panic amid revelations to which even such economic bastions as Germany are not immune.Officials also said it was critical to address fresh investor concerns that Finland's demands for collateral could derail a second €160-billion bailout for Greece.Patrick Young, executive director of investment firm DV Advisors, believes that this is a very interesting meeting, because it demonstrates that within the EU itself there is a very significant struggle and argument over what will save the eurozone.“We keep having these false agreements, everybody says that the eurozone crisis is solved and then with a matter of few weeks we have a further crisis in another economy and we need more money,” he said.Young says that one of those who have discussed the eurozone problems today, Jacek Rostowski, the Polish Finance Minister, is a thorough realist. That makes him different from French and German officials campaigning for the lending of more and more money to struggling economies. “This is a man who understands, he is actually a lecturer in economics, and therefore he understands finance, which a lot of eurozone people do not understand, because they are pure politicians,” he argued. “And he is saying ‘I won’t take my currency, the Polish Zloty, and put it into the eurozone until I know the eurozone is earthquake-proof.’ And he is absolutely right.”

Euro zone in 'extended inflation phase'

Dr. Christian Rieck of Frankfurt Technical University does not have much faith in the outcome of the summit in Brussels. “They will more or less cover up the whole thing and then try to make the grass grow over the whole situation till everybody forgets it,” he told RT. The summit is not a remedy to the crisis in the euro zone, continues Dr. Rieck. “They [EU officials] have missed the right time to take the appropriate measures,” said Dr. Rieck. “They should have excluded Greece at the very beginning of this crisis from the eurozone. They should have taken some of the rescue money to cushion this for the population in Greece. This would have been a very strong sign for the whole world that everybody is really serious about the euro.” Dr. Rieck believes the euro zone has moved into "an extended phase of inflation", just like the start of the world’s economic crisis in the 1920s. He expects the crisis to show a sudden and grave deterioration in the future.