Trichet warns countries losing fiscal credibility

The fiscal situation in some European countries is so bad there is a danger markets will lose faith in them, European Central Bank President Jean-Claude Trichet warned in an interview on Tuesday. "Some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing their credibility," he told French newspaper Le Monde, saying it could stall the recovery process. This could even the stall the nascent recovery, he added. "The success of the recovery in Europe depends on the confidence of investors in the creditworthiness of sovereign issuers." A hit in government credit ratings would also increase interest rates in the private sector, he said, and added governments must get fiscal consolidation on a credible path in 2011 at the latest.