This could even the stall the nascent recovery, he added.

"The success of the recovery in Europe depends on the confidence of investors in the creditworthiness of sovereign issuers."

A hit in government credit ratings would also increase interest rates in the private sector, he said, and added governments must get fiscal consolidation on a credible path in 2011 at the latest.

Trichet repeated his earlier comments key interest rates are appropriate at the moment and that the ECB will progressively unwind its non-standard measures.

He also repeated the well-worn line that it is important to note the U.S. authorities have stated the strong U.S. dollar is in their interest.

The euro was trading at 1.4912 at 1028 GMT, at levels some politicians have warned could handicap the euro-zone recovery. Trichet also said third quarter euro zone gross domestic product (GDP) data, which showed the bloc pulled out of recession, confirmed the ECB's base scenario of a progressive pickup in the economy. A Eurostat flash estimate showed last week the euro-zone grew 0.4 percent in the third quarter from the previous one. (C ) Reuters