Trichet moves to shore up eurozone confidence

European Central Bank chief Jean-Claude Trichet has said pessimism over the eurozone is overblown, with the 16-member region unlikely to suffer a double-dip recession.

Mr Trichet struck a cautiously optimistic tone while speaking to journalists on Thursday (8 July) in Frankfurt, after a meeting of the bank's governing board decided to hold interest rates at one percent.

"We are in a situation where a number of facts and figures and data are not, I would say, confirming that we would have stagnation or a double-dip," he told the news conference.

Data suggest second quarter eurozone growth this year was significantly stronger than the previous three months, although the ECB's growth forecast for 2010 remains unchanged on one percent.

Germany is largely driving the improved scenario, with the county enjoying a rise in exports of 9.2 per cent and industrial production by 2.6 per cent in May compared with April.

"One should not underestimate Europe," said Mr Trichet, who has overseen the ECB's provision of an array of extraordinary measures in order to shore up Europe's financial sector and wider economy.

Most controversial was the decision in May to enter the secondary sovereign bond market, with the bank's bond purchases totaling just €4 billion last week, down from €16.5bn in its first week of operation.

The veteran banker hinted that this trend may result in the scheme coming to an end shortly, as investors gradually "incorporated" information about the €750 billion rescue mechanism created by the EU and IMF.

Mr Trichet said plans to publish the results of 'stress tests' on the regions top banks later this month was also adding to a growing confidence in the region.