The head of the European Central Bank, Jean-Claude Trichet, has warned the euro zone faces several more tough months.
He told the European parliament the region’s governments must move quickly to restore confidence in the banking sector with rescue plans and said a fragile recovery could be derailed by various factors: “Global weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters. Risks to economic growth lie on the downside, relating to concerns for a stronger impact on the real economy of the ongoing financial turmoil, protectionism and possible disorderly developments owing to global imbalances.”
The Organisation for Economic Co-operation and Development is predicting growth in the euro zone will decline 0.6 percent next year, but inflation will also fall, while the jobless total will rise to 8.6 percent of the working population.
Trichet also said the financial crisis was not to blame for the current economic downturn. He said the slowdown was inevitable after major growth in recent years and a high oil prices that sent inflation soaring hitting business activity and household spending.