MercoPress. South Atlantic News Agency

Europe living “truly dramatic times”, the most difficult since WWI, says Trichet

The European Central bank president called for “quantum leap” of financial control

European Central Bank President Jean-Claude Trichet called for more effective sanctions against countries violating the region’s Stability and Growth Pact and said the ECB acted independently when it bought government bonds, Spiegel magazine reported, citing an interview.

Europe is witnessing “truly dramatic times” and the situation may be the most difficult since World War I, Trichet was cited as saying. Recent market turmoil was similar to the collapse of Lehman Brothers Holdings Inc. in September 2008 and such turbulences can be contagious, sometimes within hours, he told the magazine.

Trichet called for a “quantum leap” of mutual control among governments, Spiegel magazine reported. The ECB was “not listening to recommendations” from lawmakers and financial markets when making a decision to buy government bonds, he said.

European policy makers last week unveiled a loan package worth almost $1 trillion and a program of bond purchases in an effort to contain a sovereign-debt crisis that has threatened to shatter confidence in the Euro.

Tricher said markets are no longer working and called for “improved structures to avoid and punish transgressions”, insisting that “we need effective mutual control and to adopt effective sanctions against those who violate the growth and stability pact”.

Fears of contagion have spread to hugely indebted countries such as Portugal, Spain and Ireland, with different intensity, but the Euro last Friday closed at it lowest in four years in New York, 1.2355 US dollars.