(Adds background, more quotes from Trichet starting in fourth paragraph)
FRANKFURT -(Dow Jones)- The financial-market selloff in the wake of the Greek debt crisis had started to resemble the situation following the collapse of U.S. investment bank Lehman Brothers in autumn 2008, European Central Bank President Jean-Claude Trichet was quoted as saying Saturday.
That's why the ECB and euro-zone governments had to take decisive action, also to limit the risk of contagion to other countries, Trichet told German magazine Der Spiegel in an interview conducted Thursday but published Saturday.
"A number of markets were no longer functioning correctly; it looked somewhat like the situation in mid-September 2008 after the Lehman Brothers' bankruptcy," the central bank president was quoted as saying.
Recalling the dramatic events in the run-up to Europe's decision to provide massive financial support to struggling Greece, Trichet said, "On Thursday afternoon and throughout Friday we had a continuous deterioration of the situation in the financial markets, both in Europe and, as a consequence, at the global level. On Friday markets closed and number of important indicators, spreads on sovereign bonds in Europe, [credit default] spreads and the situation in the interbank market were signaling the spreading of severe tensions."
"I made those points to the Heads of State and Government on Friday evening," he said.
The ECB on Monday, for the first time, started to intervene in the euro zone's public- and private-debt markets. At the same time, euro-zone finance ministers said they created a EUR500 billion support plan for countries facing financial meltdown.
The move helped to stop a sharp selloff in bonds issued by the euro zone's so-called "periphery" countries, or those in a weaker fiscal situation and/or with a lower credit rating.
"We have experienced--and are experiencing--truly dramatic times," Trichet said.
Asked whether there had been an acute risk of the Greek crisis spreading to other euro-zone countries, such as Portugal, he said: "In the market, there is always a danger of contagion...it can occur quickly. Sometimes it is a question of half days."
Magazine Web site: http://www.spiegel.de ECB Web site: www.ecb.int
Copyright 2009 Dow Jones Newswires
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