The European Central Bank’s policymakers have started to take steps towards reversing the loose monetary policy brought in to help the euro zone economy climb out of recession.
ECB President Jean-Claude Trichet said conditions for making some short term loans to banks will be tightened up: “We have continued to gradually and (in a timely manner) phase out the non-conventional measures that we had taken. I would say that these decisions have been taken on the basis of an overwhelming consensus.”
But forecasting a fragile and uneven recovery, the ECB held interest rates at a record low level of one percent.
Trichet also had praise for Greece’s efforts to cut spending and bring its deficit under control. He said: “Greece today is in a much better state – taking into account its own activity, its own output – than it was before”
The draconian measures announced by Athens to help put its finances in order included pay cuts, a pensions freeze and tax increases.
That angered Greek unions, but did help it sell five billion euros worth of 10-year government bonds.
There was strong demand for the bonds, but Greece had to offer a better rate of return, because investors remained nervous about the possibility of default.