BRUSSELS, Jan 21: European Central Bank head Jean-Claude Trichet said on Wednesday that fears the eurozone might break up under the strains of the global financial crisis were “unfounded.”

Asked in the European Parliament whether the turmoil could force the 16-member eurozone to split, Trichet said: “I think these rumours are unfounded about the euro.”

He said that all currencies were under pressure due to the economic crisis and that all currencies were “undergoing a test.”

Nevertheless, “I would tell you that obviously the euro and the eurozone has shown resilience and resistance in this crisis.”

Trichet expressed optimism that the euro area economy would pick up next year after what he predicted would be a difficult 2009.

“After a year 2009 that we see as a year of great slowing down and difficulty in terms of growth, we see 2010 as the year of going back to positive figures, picking up after difficult years 2008 and 2009,” he said.

“This observation seems to me valid for the euro area economy as it seems to me valid for the global economy as a whole ... it seems to me that 2010 could be the year of the pickup.”

In a later interview with CNBC television, Trichet said that further interest rates could not be ruled out, although it was not the ECB’s intention to cut rates to “very low levels.”

“It wasn’t our intention to go down to a very low level,” Trichet said. However, he noted the ECB had “not decided, in any respect, that two per cent is the lowest level.”

The ECB has slashed interest rates by a total of 225 basis points since early October in a bid to stave off what threatens to be a deep and painful recession in the 16-country zone.Last week, the bank decided to cut rates to 2.00 per cent from 2.50 per cent.

Trichet said countries should be allowed to use fiscal stimulus packages to stave off recession but they must nonetheless stick to EU rules that limit public deficits to three per cent of gross domestic product.

It was all the more important in the current economic climate that governments respect the EU’s Stability and Growth Pact, Trichet said, adding he was “not particularly worried” that deficits were spiralling out of control.—AFP