Via RTE: Trichet looks to Asian, oil crises for lessons

Trichet stressed repeatedly today that the ECB saw its role amid the turmoil as one of anchoring inflation expectations, making clear that an interest rate cut called for by some investors and politicians should not be expected in the near future

‘If we don’t learn the lessons of the past we will find ourselves faced with the same problems that we encountered during the first oil crisis,’ when countries responded to higher prices by raising wages and salaries, he said.

That had fuelled an inflation spiral, choking off growth and causing widespread, stubborn unemployment that dogged Europe for decades. ‘Never forget, mass unemployment in Europe started with the very bad reaction after the first oil shock’ in 1973, Trichet noted.

Note too that the German economy hasn’t slowed yet and the metal industry there is experiencing the strongest boom in decades. Even the Ifo index has increased this month showing that the business climate has improved in March instead of getting worse.