SPIEGEL: So, what was in danger? Just the banks? The euro? The European Union?
Trichet: We are now experiencing severe tensions, which are coming after the events of 2007-2008. At that time, private institutions and markets were about to collapse completely. That triggered a very bold and comprehensive financial support by governments. And now we see the signature of some governments put into question. This is a problem for almost all industrialized countries. In the G-7, the major economies have a yearly deficit of around 10 percent of gross domesitc product (GDP). In the euro area as a whole it averages 7 percent of GDP. In this situation with extremely elevated deficits across the globe, the markets have singled out a weak link: Greece. Also taking into account the fact that its statistics were incorrect at one time, market pressure was concentrated there and a drastic adjustment program was necessary.
SPIEGEL: Apparently it was not only Greece that came under attack. Portugal was next ...
Trichet: In the market, there is always a danger of contagion -- like the contagion we saw among the private institutions in 2008. And it can occur quickly. Sometimes it is a question of half days. This is an issue for the industrialized world as a whole....
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Filed under: * Economics, Politics Economy Credit Markets Euro European Central Bank The Banking System/Sector * International News & Commentary Europe Germany Greece Portugal Spain
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