Global economy skirted depression
Central bankers meeting in Switzerland Monday said the world avoided an "extremely threatening" depression, but some risks remain.Basel -- The world has avoided an "extremely threatening" depression but remaining risks could still diminish 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 due to exceptional measures taken by world governments and central bankers.
World financial markets suddenly stopped following the collapse of US investment bank Lehman Brothers in 2008, forcing governments to adopt drastic measures such as pumping in cash to get credit flowing again, increasing bank deposit guarantees to prevent massive bank withdrawals and even nationalising troubled banks.
Trichet said these policies had brought "stabilisation" on a global level and he repeated that economic growth was "confirmed at a level that is a little better than was previously projected."
He also warned that it was "no time for complacency."
"We have large numbers of issues that are still there," including a growing unemployment problem and economic imbalances, both of which can decrease confidence.
Unemployment traditionally follows 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 reached double-digits for the first time in 26 years, reaching 10.2 percent in October.
Trichet observed that even though some of the unconventional measures taken to prevent collapse 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.
AFP / Expatica