EUROPEAN CENTRAL Bank chief Jean-Claude Trichet has dismissed fears of a double-dip recession in euro area economy, saying new data suggest the zone’s fragile recovery gathered pace in the second quarter of the year.

As Mr Trichet defended the rigour of ongoing stress-testing on 91 European banks, he said the secondary market for euro-zone government debt was functioning “perhaps a little bit better” since the bank’s intervention in the market two months.

The single currency rose to a two-month high against the dollar yesterday as Mr Trichet said the bank’s policymakers felt the requirement for the ECB’s interventions in public debt markets “has been progressively diminishing”.

Information about the €750 billion rescue net created by the EU and IMF was being “progressively captured” and “incorporated” by market participants, he added.

The ECB bought some €16.5 billion in the first week of its bond purchase programme in May. It has bought about €4 billion in each of the last two weeks and bought €5.5 billion in the preceding week.

Speaking to reporters here after the bank’s governing council held its core interest rate at an all-time low of 1 per cent for the 15th successive month, he adopted a tone of tentative optimism about the turnaround in the European economy.

“We are in a situation where a number of facts and figures and data are not, I would say, confirming that we would have stagnation or a double-dip or whatever.

“That’s not at all what we are observing at this stage.”

While saying the EU/IMF rescue net should be operated with flexibility, he declined to say directly whether the loan guarantee scheme should be used to help recapitalise European banks. He added, however, that “appropriate action” will have to be taken where needed.

He also rejected claims that the tests should be tougher.

“I don’t think it is an appropriate way to characterise what we are doing.”

In addition, he expressed resistance to suggestions from the German government that the EU authorities should develop an orderly sovereign insolvency procedure in the euro area. “On that front I don’t think it would be opportune.”

On the region’s economic recovery he was tentatively optimistic but said there was no reason yet to change the ECB’s current forecasts, which were revised upward last month.

“The second quarter in the euro area is likely to be much better than the first quarter,” said Mr Trichet.