ECB president criticises US stimulus policy

European Central Bank president Jean-Claude Trichet has called for the West to increase taxes and slash public spending.

In an article for the FT, Trichet appeared to be putting Europe on a collision course with the US by arguing that it would be wrong to continue with fiscal stimulus as the economy moves into recovery mode. The Fed has argued that loose fiscal policy should continue at least into next year, but Trichet is placing greater emphasis on reducing budget deficits around the continent.

Eurozone growth has proven surprisingly resilient over the last month leading to fears of Greek contagion receding.

Trichet writes: 'We have to avoid an asymmetry between bold, if justified, loosening and unduly hesitant retrenchment.'

He adds: 'With the benefit of hindsight, we see how unfortunate was the oversimplified message of fiscal stimulus given to all industrial economies under the motto: "stimulate", "activate", "spend".'