European Central Bank President Jean- Claude Trichet said higher unemployment might damp an economic recovery in the 16-nation euro region.

"We will have to accept that unemployment will have to augment, maybe significantly, and that will have a bearing on the evolution of growth," Trichet said in an interview with Bloomberg Television Friday after the ECB left interest rates unchanged at a record low of 1%. "We have to remain ourselves very cautious and also very prudent."

The euro region's jobless rate rose to a decade-high of 9.4% in June as companies shed jobs amid the worst recession since World War II. That comes after European economic confidence rose to an eight-month high in July and a contraction across the region's manufacturing and service industries slows.

While the ECB currently predicts the economy will contract about 4.6% this year and 0.3% in 2010, Trichet didn't exclude the bank may raise its forecasts next month. Some economists expect the economy to return to growth this quarter.

"I exclude nothing," Trichet said when asked about the chances of growth in Europe this year. "We have to take into account all the signs that the contraction is slowing down. But at the same time we have to remain prudent."

Trichet said interest rates are "currently appropriate" and refused to say whether they have reached their lowest level. "There is no news there, we did not discuss it" Friday, he said.

The man is amazing; the sooner he goes, the better off Europe will be - simple as that in my humble opinion! He states the obvious, the absolute obvious and always about a month or two too late. Plus of course, he always says things that other people have already mentioned and I think it is not within his capacity to state something 'original' - the guy is a walking (limping) parrot!

Europe is better off without you Mr Trichet and I have just the candidate to replace you:

When Mervyn King, the governor of the Bank of England, stood up in the grand setting of the Mansion House in the City of London on the warm evening of 17 June, with the Chancellor Alistair Darling sitting just a few seats away, he did what he has done throughout the financial crisis: he challenged the government directly. National debt, he warned, was dangerously high, "at more than double the levels before the crisis".

Banks had become too big and the Bank of England itself needed greater powers. "The Bank finds itself in a position rather like that of a church whose congregation attends weddings and funerals, but ignores the sermons in between."

In a televised appearance in front of the Treasury select committee just a week later, King went further and all but accused the Prime Minister of carelessness with the public finances. "We are confronted with a situation where the scale of the deficits is truly extraordinary," he said, and noted, in an aside that perplexed the Treasury, that the Chancellor had not bothered to consult him on changes to banking legislation that would directly affect the Bank of England.

King is an unlikely rebel. Quietly spoken and cerebral, he is the first governor of the Bank of England to have been a full-time academic: before joining in 1991, he was a professor of economics at the London School of Economics. Yet, since the credit markets first froze over in August 2007, he has been in pugnacious mood and continuously in conflict with the Treasury and the Prime Minister. At times, throughout what is the worst financial crisis since the period leading up to the First World War, the relationship between King and the government has been radioactive.

Some Treasury insiders go so far as to accuse King of being concerned about protecting his reputation and that of the Bank to the detriment of everyone else involved in stabilising the finan­cial system and preventing a cataclysmic collapse.

The authority of Bank of England governors once stemmed from the dignity of the office they held. The authority of the present governor stems entirely from his intellect. In the past, governors were drawn largely from the banks of the City of London. When these stately figures moved from the parlours of the old merchant and clearing banks to Threadneedle Street, to be protected from the outside world by the great curtain wall designed by Sir John Soane, they transmogrified into something far more majestic. The visitor to the Bank would be guided through a maze of spacious corridors, under the vaulted ceilings, to the almost-hidden entrance to the governor's drawing room. On their journey, they would pass portraits of past governors and deputy governors. The escorts, pink-frock-coated "waiters", nearly all veterans of the armed forces, marched at a formidable pace. In the presence of the governor, all it required was a lift of the eyebrow for the attendant banker to recognise the game was up.

Friday, the Bank's corridors are as magnificent as ever, the marbles, mosaic floors, Persian rugs and Chippendale furnishings unchanged, and the mystique remains intact, but its new core is that of rigorous analysis. The bankers and brokers, who were on easy terms with the governor, are no longer the insiders. King, who took an academic route to the top of the Bank, is a trenchant critic in public and private of the bankers, of their risk-taking, profiteering and greed. And it is King's cerebral approach and tendency to subject all he does to rigorous intellectual stress-testing that has opened a chasm between himself and Gordon Brown.

Downing Street was especially enraged when, on the eve of the G20 summit in London in April, King warned against "significant fiscal expansion". In so doing, he thwarted the Prime Minister's hopes of forging an agreement with President Obama and other global leaders on a second round of anti-recessionary stimulus packages. King's views accorded with those of the Treasury, which was putting the final touches to a Budget that projected unprecedented levels of new borrowing - £703bn by 2013-14, or an ­astonishing 76.2% of national output.

But King has exasperated the Treasury, too. In private, the Chancellor was incandescent with anger when King, at his May inflation report press conference, laid out a far gloomier prospect for the British economy than that described by Darling in the Budget. The Bank forecast output could fall by as much as 4.5% in 2009 and that recovery could be delayed well into 2010. King was downbeat, in sharp contrast to the message of Darling, who had been making the case for recovery by the end of the year.

The differences of tone provided a sharp reminder of how hard it had been throughout the crisis for the Treasury to coax King into  responding to the need for decisive action, notably over the creation of the special liquidity scheme - which was designed to clear the bank balance sheets of mortgage debts. King delayed, demanded late-night meetings and relentlessly analysed the plan - "nitpicking it to death", as one insider put it.

Brown was expected to have taken the ­decision on King's reappointment to a second five-year term in late 2007, when the scale of the disaster affecting the world's ­financial markets was increasing. The Prime Minister hesitated in approving the reappointment, and leaks pointed to King's position as governor being in danger. But Brown eventually recommended a second term for King on 30 January 2008. His aides warned that discarding King in the middle of the crisis could provoke havoc on financial markets.

Having kept King in office, the government had little choice but to work with him. Nevertheless, at the Treasury, King is regarded as difficult to the point of obstreperous. The paradox of his position is that the power and moral strength that he exercises is largely the result of one of the earliest decisions taken by Brown as chancellor in May 1997, when, following Labour's landslide general election victory, he set the Bank of England free of Whitehall and granted it full independence over monetary policy and the ­setting of interest rates.

King is accused of being slow to have recognised the scale of the crisis when the credit crunch hit in August 2007, in sharp contrast to his opposite number at the European Central Bank in Frankfurt, Jean-Claude Trichet. King has since moved an enormous distance, but not at a speed fast enough or in a responsive enough way for Downing Street. His critics say that it was only when the Bank realised that there was very little choice, if the nation was not to have a major bank failure on its hands, that he decided on the Bank's role as "lender of the last resort" and began pumping ever-increasing quantities of loans into Northern Rock when it hit trouble in August 2007.

He similarly prevaricated in April 2008, only reluctantly signing up to the government's special liquidity scheme, under which the Bank would take securitised mortgages held by banks on to its balance sheet in exchange for short-term paper - the equivalent of cash. The initial £50bn plan, intended to revitalise Britain's moribund home loans market, would eventually soak up more than £200bn of taxpayers' money.

The Bank also changed the way it conducted its operations in the money markets, or the inter-bank market, where banks lend to each other. Previously it had provided money to the banking system through a series of daily, weekly and monthly auctions, at which authorised financial institutions would bid for money when they could not square their books. This process had sometimes proved embarrassing, as happened in the summer of 2007, when the names of those banks (notably Barclays) which had temporarily run short of cash was publicised. (The Bank of England would eventually move to a US-style "discount" window arrangement, whereby banks can borrow directly without the risk of their identity being disclosed and becoming stigmatised in the financial markets.)

King claims he was at the forefront of the dramatic move by the government, in September 2008, which resulted in the recapitalisation of British banks and their part-nationalisation.

Where the Brown government led, other countries followed, or so it was said. Brown, in a slip of the tongue in the Commons, told MPs he "had saved the world". Most recently, King has embarked on an ambitious programme of quantitative easing, or printing money. This involves buying up government and corporate bonds for cash in an effort to head off deflation and refloat the economy - a bold move.

King saw his appointment as an "interesting secondment" and not necessarily as a long-term career move. On Black Wednesday, 16 September 1992, when Britain was left without a monetary framework following ejection from the ERM, it was King who picked up the pieces; he invented and personally wrote the first of the Inflation Reports that were to become the centrepiece of policymaking. When the Bank was given its independence on 6 May 1997, his future path was all but set. In 1998, he was elevated to deputy governor, with responsibility for monetary policy, and became the first governor from academe when George retired in 2003.

Yet, in retrospect, the seeds of the credit crunch were planted with independence when Brown announced that banking supervision was to be moved from the Bank to a newly created Financial Services Authority, against the wishes of Eddie George. "Financial stability became the least interesting part of the Bank," a former member of the Monetary Policy Committee, which sets interest rates, said. "Until the crisis no one who wanted to be successful wanted to work there."

King denies such criticism. He believes that the Bank's financial stability wing was ahead of the game in warning about the dangerous build-up of debt and credit that ultimately contributed to the implosion of the financial system. If this is true, why did the Bank not do more to prevent disaster happening? An important reason is that few people were prepared to listen.

Through the autumn of 2007, as the government struggled with the collapse of Northern Rock, King sought to improve his understanding of the crisis and what steps needed to be taken. He reads deeply in financial history and has set up his own book club, which enables him to play host at his home in west London to leading economic and financial historians. During this long period of intense reading and deep introspection, as he consulted the Bank of England archives looking for historical parallels to the present crisis, King came to believe that the crisis facing the banking system was certainly the worst since the period of near-meltdown before the First World War. From among the extensive literature of financial crashes, he regarded J K Galbraith's The Great Crash, 1929 (first published in 1954) as the most insightful, and also admired Walter Bagehot's Victorian classic Lombard Street (1873).

King's reading led him to accept that the problems of the banking system were not just those of liquidity, but of capital - the equity and other top-grade securities that underpin lending. Historically, the ratio of capital to lending was seven to ten times. In the run-up to the credit crunch, some of the investment banks were lending 60 or 70 times capital. Because banks were insufficiently capitalised for the vast lending they had done, fear and loathing stalked the money markets. The governor believed that trying to persuade banks to increase lending would be a waste of time until they had restored their capital bases and trust resumed on the money markets.

The governor was becoming more confident in the crisis and his remedy, dramatically, was adopted by the government in September 2008 following the collapse of Lehman Brothers, the 158-year-old Wall Street dealer-brokerage firm.

King was at this point showing himself to be a "Roosevelt-calibre politician" in his handling of the crisis. Yet, at the same time, King, newly ­appointed to a second term, found himself in open conflict with the Treasury. Darling wanted a scheme directly to support the mortgage market. King wanted nothing to do with any package that rewarded the banks for their mistakes. Eventually, after much prompting and political prodding and severe irritation on Downing Street's part, the special liquidity scheme, under which banks could exchange mortgages, was born on 21 April 2008.

It was not an easy birth. Hunkered down in his office at Threadneedle Street, King delayed and fussed about the detail of the scheme, much to the irritation of the Treasury and the elected politicians, who were not convinced he had grasped the gravity of what was happening. In spite of the seriousness of events, King never lost his sense of humour. At the height of the storm, he had to fly to Japan for a routine session of G7 finance ministers. One participant recalls how King regarded the exercise as futile and, to pass the time, "decided to mark the finance leaders out of ten for their sartorial elegance".

King likes to believe that it was his bold thinking which eventually led Brown and the government to recapitalise the British banks on 13 October 2008. The dramatic decision left the British government with majority stakes in Royal Bank of Scotland and Lloyds Banking Group. The implementation may have been carried out by the Treasury, but it was King and the Bank which made the case in Whitehall for a comprehensive bailout. King is of the view that the solution had to be an economic one, not the partial solutions and spatchcock bailouts being demanded by individual banks. He was determined that top bankers should be made to pay for their sins with their jobs. The government should draw the line under "fat-cat" bonuses, he said, and insist in future on counter-cyclical banking under which bankers would build cash reserves during the good years instead of paying them out to staff through bonuses.

King was emboldened. After output plunged in the first quarter of 2009, he rapidly redirected the Monetary Policy Committee and the Bank to start a programme of quantitative easing. Once again, the governor had reached into the past for clues about how to combat deflation. He concluded that the Japanese response to deflation in the 1990s and the Federal Reserve's failure to provide adequate money in the 1930s offered the best answers.

Throughout the financial crisis, King never lost his intellectual bearings. Certainly his early responses to the credit crunch and the collapse of Northern Rock were feeble, but as the crisis intensified he came to be seen as a voice of sanity amid the claims of "saving the world" coming from Downing Street. In retrospect, King's insistence that the Bank should be given huge new powers to intervene in future banking crises made eminent sense.

King is likeable, and he is able to explain financial complexities in a direct and understandable way. But protecting his own reputation often seems as important to him as looking after colleagues or the actual results of the Bank's actions. He has taken independence to the limit, publicly challenging the government, and speaking out whenever he can, so that there is no ambiguity about his own position, even if it means placing himself in direct opposition to the Prime Minister. If his decision - gamble, really - to flood the economy with cash achieves the desired objective of refloating the British economy, the governor rather than Gordon Brown could yet emerge as a hero of the crisis.

Who better to run the ECB and turn things around?

For those of you that don't know me better, I am of course joking about Mr King because I for one have no real idea who is the right person to take over from Mr Trichet - but what I do know is that someone has to take over from him sooner rather than later if Europe is to make serious progressive steps.

On to the numbers for the week that was: