ECONOMY

Trichet firm on no default for Greece

The European Central Bank remains adamantly opposed to any form of default for Greece, whether whole or partial, ECB president Jean Claude Trichet said on Thursday.

Trichet stressed that the bank’s position had not changed and it was opposed to a partial default or any form of credit event that would be taken as a debt default.

“No credit event, no selective default, no default. That is the present message of the governing council,» Trichet said.

He spoke against a background of warnings from credit rating agencies that a mooted debt rollover for Greece with voluntary participation by private bank creditors might still trigger a selective default rating.

“It is clear that there is an element of procyclicality which is embedded in the functioning of the credit rating agencies that is not optimal,» Trichet said.

“It’s also clear that a small group, a small oligopolistic structure, is not what is probably desireable at the level of global finance,» he added.

Trichet said that the ECB disapproved of a decision by Moody’s rating agency to slash its ratings on indebted Portugal to junk status, roiling financial markets concerned that the eurozone debt crisis is spreading from Greece to other countries.

The ECB raised interest rates for the second time this year on Thursday and signalled further policy tightening to come to tackle inflation despite the eurozone’s intensifying debt crisis.

But it offered help to hard-pressed Portugal after ratings agency Moody’s downgraded its debt to junk status this week, committing to keep providing it with liquidity.

“We will continue to monitor very closely all developments with respect to upside risks to price stability,» Trichet told a news conference after the bank raised interest rates by 25 basis points to 1.5 percent.

Economists said before the news conference that use of that phrase would signal a further rate rise in 2011, likely to be in the last three months of the year.