ECB's Trichet Says Market Correction Is `Not Over' By Simone Meier April 21 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the financial-market crisis is not over and there are still tensions in money markets. The ``present significant market correction is not over,'' Trichet said in the foreword to the ECB's 2007 annual report published in Frankfurt today. While overnight interest rates have been successfully returned to ``stable levels,'' Trichet said ``tensions remain'' at longer maturities in the money market. Banks have stopped lending to all but the safest borrowers as losses mount on investments tied to U.S. subprime mortgages. In an effort to facilitate lending, the ECB has made extra liquidity available to banks for periods of up to six months. Still, the cost of borrowing euros for three months today climbed to 4.81 percent, the highest level since Dec. 19, according to the European Banking Federation. The rate has gained 44 basis points in the past two months. Trichet said the ECB has kept its key rate at 4 percent since June last year to assess the impact of market turmoil on the economy. ``At the same time, the Governing Council confirmed its permanent readiness to do whatever was needed in order to ensure that upside risks to price stability would not materialize,'' he said. Trichet said some countries in the 15-nation euro region ``should pursue much more ambitious policies'' to improve their structural budget positions. Yen, Dollar Reserves While the average fiscal deficit among euro-region states declined to 0.8 percent of gross domestic product in 2007 from 1.5 percent in the previous year, ``a renewed increase in this ratio is already projected for 2008 at a time when many countries have still not achieved sound fiscal positions,'' Trichet said. ``Discretionary fiscal loosening would be totally inappropriate.'' In its annual report, the ECB said it sold 79 tons of gold in 2007. ``Most of the proceeds of the gold sales were added to the Japanese yen portfolio and, to a minor extent, to the U.S. dollar portfolio,'' the ECB said. U.S. dollar-denominated assets represented 79.7 percent of foreign currency reserves at the end of the year, while those denominated in yen accounted for 20.3 percent, the bank said.