The head of the European Central Bank today expressed his 'grave concerns' about economic governance in the euro area in what he called an 'exceptionally demanding and uncertain' environment.

Speaking at a central banking conference in Frankfurt, Jean-Claude Trichet recalled that the ECB had expressed worries about the weakening of the Stability and Growth Pact, which seeks to limit the budget deficits of EU member states.

'In the past days, taking into account the lessons of the global crisis, in particular as regards its impact on the European single market and in the single currency area, we have called, and are still calling, for a quantum leap of governance,' he added.

Describing the current situation on the financial markets and the economy as 'exceptionally demanding and uncertain,' he stressed it was all the more important 'to preserve and reinforce the authority of public authorities.'

Trichet was speaking as officials from the European Union, the ECB and the International Monetary Fund arrived in Ireland to assess the country's financial situation.

The EU is extremely concerned that Ireland's weakness could lead to a contagion that could drag down other heavily indebted economies in the 16-nation euro zone such as Spain and Portugal.

Turning to current ECB policy, Trichet said the bank was keeping all options open on potential exit strategies from exceptional stimulus measures designed to shore up the struggling euro zone economy during the global crisis.

'We consider that we are not bound to unwind non-standard measures before considering interest rate increases; we could do one or the other or both,' Trichet said. The ECB has provided euro zone commercial banks with unlimited cash loans to ensure liquidity in the money markets and ease a credit crunch that spread to the broader economy.

It has also kept its short-term interest rates at a historic low level of 1% in a bid to stimulate demand.