Trichet confident of 'appropriate' Cyprus solution

Former ECB president Jean-Claude Trichet said Wednesday he was confident an "appropriate" solution will be found for Cyprus's banking crisis, despite lawmakers rejecting contentious bailout terms.

"The will of the international community to help is obvious, and I am confident that they will find an appropriate solution," he told the Wall Street Journal at an investment conference in Hong Kong.

"We need to be extremely cautious, extremely prudent" when imposing cuts on the private sector in any rescue plan, Trichet added, but said he did not see a risk of financial contagion with "whatever solution is finally decided".

As the European Central Bank president until 2011, Trichet faced criticism for his response to the Europe-wide crisis in sovereign debt and banking that stemmed from the near-collapse of the world economy in 2008.

But the Frenchman said the Cyprus crisis proved the need for more fiscal coordination in the European Union, and was "confirmation of the political and strategic will of the Europeans to continue to unite more".

On Tuesday Cypriot MPs rejected a proposal to impose a levy on bank savings as part of a bailout deal agreed in return for a 10-billion-euro ($13-billion) rescue from the EU, ECB and International Monetary Fund.

Media reports in Cyprus said the government would now seek other ways of paying its bills, with a bond issue, bank restructuring and new Russian investment among the options.

at/pdh/jit