European Central Bank president Jean-Claude Trichet has said he has full confidence that the Irish Government will take the necessary decisions to come through the current problems.

Speaking to RTE, he rejected suggestions that Ireland risked not being able to borrow on international markets as 'absurd'.

Earlier, in a speech to the Institute of International and European Affairs in Dublin, he said these were challenging times both for Ireland and for Europe and the global economy.

Mr Trichet said Ireland's government was 'acting resolutely' to address the economic situation.

He said the Irish economy has been undergoing 'a necessary rebalancing in the composition of its growth', intensifying the challenges it faces. Mr Trichet said that, in particular, the construction and banking sectors needed to adjust.

He said it was essential that budgetary policy 'convincingly' reduces future public deficits.