The £4.5 trillion pledged by governments to the world’s bankers has failed to end the threat of meltdown at the heart of the global financial system, Jean-Claude Trichet, the President of the European Central Bank, said yesterday.

In a stark warning that the worst of the crisis could lie ahead, Mr Trichet urged global leaders to act quickly to pump the oxygen of credit into asphyxiating economies.

“We are not yet out of the storm,” he told a conference in Frankfurt as he highlighted the continued risk of a liquidity crisis despite the state-backed rescue packages.

His comments came as the ECB published a gloom-filled monthly bulletin showing that governments had failed in their attempt to terminate the financial turmoil before the onset of recessions. The ECB painted a grim picture of shrinking economies and strain on financial systems.

A week after Europe’s central bank announced a record 0.75 per cent interest rate cut to bring the main lending rate down to 2.5 per cent, it said market uncertainty “remains exceptionally high”.

The ECB said that governments should push through bank salvage deals swiftly “so as to help ensure trust in the financial system and to prevent constraints on credit supply to companies and households”.

The implication was that the short-term loans, capital increases and loan guarantees pledged by governments to bankers had so far failed to restore confidence or end the credit crunch.

The Bank of England put the total amount pledged to the world's banks at £4.47 trillion at the end of October.

Mr Trichet said the threat of a liquidity drought remained. “The recent events have shown how the member states and the European Union institutions can act in a rapid and coordinated manner when necessary,” he said. “However, there is no room for complacency.”

The ECB held out dismal prospects for the eurozone economy, which it said would grow by 1 per cent this year before shrinking by 0.5 per cent next. Economists criticised the bank as overoptimistic.

Holger Schmieding, a Bank of America economist, said recent industrial output data could force the ECB to consider a further rate cut in January. However, most analysts said that its scope for further aggressive rate cutting is limited, and pointed to subsequent remarks by ECB executive board member Jürgen Stark, who said: “After this substantial rate cut, the remaining room for manoeuvre is very limited, potentially allowing for small steps only.”

The markets seized on this, further propelling the euro to a seven-week high against the dollar at $1.3387, and to €1.1247 against the pound.

— The French Government injected €10.5 billion into the country’s six biggest banks yesterday after its rescue package was approved by Brussels. Crédit Agricole received €3 billion, BNP Paribas €2.55 billion, Société Générale €1.7 billion, Crédit Mutuel €1.2 billion, Caisses d’Epargne €1.1 billion and Banques Populaires €950 million.

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