ECB reduces their emergency fund

The European Central Bank (ECB) will scale back its liquidity measures for fear of fuelling inflation. ECB President Jean-Claude Trichet said some fiscal stimulus measures were no longer needed to the same extent. He said any measures that pose "a threat to the achievement of price stability must be undone promptly and unequivocally". The eurozone emerged from recession during the third quarter. Its annual inflation rate is currently 0.5 %. Back in June, eurozone inflation turned negative for the first time, falling to -0.1 % after it was dragged down by lower energy and fuel prices. In July 2008 it peaked at 4.1 %, driven by the record oil prices at the time. Crisis not over Some economists have warned that the growth in the third quarter was purely driven by state aid, and fear the region will slip back into recession if it is removed. Mr Trichet himself said that it is too early to declare the crisis over. "Recent financial developments have been more benign," he added. "However a significant volume of official support underlies these developments." The central bank governor said he was keen to make sure the private sector does not become dependent on government, or central bank support. He has already signalled that the bank is unlikely to renew its offer of 12- month bank loans after the third tranche in December. Earlier this week, a second ECB council member also said the bank may offer fewer three-month and six-month loans next year. Bankers bonuses Trichet also spoke out over bankers bonuses. "Profits earned should be used, as a priority, to build capital and reserves rather than to be paid out as dividends or undue compensation," he urged. "The financial sector must not forget that it is to serve the economy and not the other way round, " he concluded. "Compensation and bonuses must remain contained."