ECB Tells Banks to Be More Open

Guidance from auditors and supervisors "is warranted" to improve structured product valuations for illiquid assets, he said. Regulators also need to make sure that banks have enough capital and liquidity to deal with sudden shocks.

Trichet said the role of the euro-zone's central bank was to preserve confidence by "firmly anchoring medium- to long-term inflation expectations for the euro area while at the same time ensuring the smooth functioning of the short-term money market.

His words were a defense of the ECB's refusal to cut interest rates in line with the U.S. Federal Reserve and the Bank of England as the financial system froze as banks became fearful to lend money and take on new risks in the wake of last year's subprime crisis.

He said current record-high inflation in euro-zone nations will go on for longer than expected and a tight labor market may lead to pay hikes that may cause a price spiral.

Inflation was based on higher food and energy prices and would be "more protracted" than expected, he said.

Further price rises for oil and agricultural products would add to high demand and low supply of goods to build pressure for higher inflation.

He also repeated a warning that new problems could emerge to push up prices.

"Wage growth may be stronger than currently expected as well as the pricing power of firms, notably in market segments with low competition," he said.

He said it was imperative that all governments and trade unions meet their responsibility to the greater economy to restrain the "wage-setting" negotiations that could trigger these second-round effects that would worsen inflation.

Uncertainties over economic growth are "unusually high," he said, insisting the euro economy was basically sound and more investments and higher spending should help feed the economy's expansion.