Global economy skirted depression: central bankers
The world has avoided an "extremely threatening" depression but remaining risks could still topple renewed economic confidence, leading central bankers meeting in Switzerland said on Monday.
European Central Bank chief Jean-Claude Trichet, speaking on behalf of other central bankers, said the world "avoided the extremely threatening depression" but warned that there was a need for "permanent vigilance and alertness."
Trichet said that the world was able to end an "economic freefall" which occurred between September 2008 and March 2009 thanks to exceptional measures taken by world governments and central bankers.
World financial markets seized up following the collapse of US investment bank Lehman Brothers last year, forcing governments to adopt drastic measures such as pumping in liquidity to get credit flowing again, hiking bank deposit guarantees to prevent runs on banks and even nationalising embattled banks.
Trichet said these policies had brought "stabilisation" on a global level and he reiterated that economic growth was "confirmed at a level that is a little better than was previously projected."
At the same time, he warned that it was "no time for complacency."
"We have large numbers of issues that are still there," including a growing unemployment problem and fiscal imbalances, both of which can erode confidence.
Unemployment traditionally lags behind growth, and its full impact is expected to be felt through 2010, particularly in industrialised economies.
The unemployment rate in the eurozone reached 9.7 percent in September, and has been projected to reach 10.7 percent in 2010 and 10.9 percent in 2011.
Meanwhile, in the United States, the jobless rate jumped to double-digits for the first time in over two decades, reaching 10.2 percent in October.
Trichet observed that even though some of the unconventional measures taken to prevent a meltdown were being phased out in a "gradual and timely" manner, central bankers remained "very very very convinced that in the present circumstances, we've a lot of risks that remain."
"Confidence remains of the essence. The central banks... would certainly consider that improving confidence where it's necessary and consolidating confidence is certainly of the essence," Trichet said.
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