Fiscal discipline urged to cure market ills

BERLIN, May 22, 2010 (AFP) – The head of Europe’s central bank and Pope Benedict XVI Saturday laid into governments for a lack of financial rigour, after investors battered the euro over fears of unsustainable debts. With the euro having plunged to a four-year low against the dollar in the past week, ECB chief Jean-Claude Trichet insisted it isn’t the currency that has a credibility problem, but the finances of certain eurozone countries.

“It’s not the euro which is under threat but the fiscal policies of certain countries which must be taken in hand,” he said in an interview published in the Frankfurter Allgemeine Zeitung daily.

Financial markets have been racked for days by worries over the possibility that some eurozone economies will no longer be in a position to repay debts and even that the eurozone itself could come apart because of the crisis.

Despite agreeing on a 750-billion-euro rescue package for any eurozone country that runs into financial straits, investors continued to flee the euro with the currency on Wednesday hitting 1.2144 dollars — the lowest level since mid-April 2006.

The euro, which has shed nearly 16 percent of its value since starting the year at 1.4386 dollars, recovere