UPDATE: Trichet: Euro Zone Facing Confidence, Not Solvency Problem

PARIS - Euro-zone countries aren't facing solvency problems despite their ballooning budget deficits, but without credible debt-cutting plans they risk missing an economic recovery, European Central Bank President Jean-Claude Trichet said Saturday.

"Above all, there's a problem of confidence, certainly not of solvency in the euro zone," Trichet said in an interview with French LCI all-news television. "What we want is to...strengthen confidence in the return to balance in a medium-to-long term perspective."

If households and companies don't trust governments to bring back their public accounts to a sustainable pattern, they "run the risk of missing...the economic pickup," he added.

The last official projection on Europe's growing public debt load came earlier this month from the European Commission, which forecast total euro-zone government debt would rise to 84% of annual gross domestic product in 2010 from 69% last year.

Under the E.U. growth and stability pact, the bloc's countries must keep their budget deficits below 3% of gross domestic product. The commission has said in the past member countries can exceed this cap temporarily during the economic downturn, but has also cited several countries - including Poland, Lithuania, Romania and Malta - for letting their deficits grow too large.

Trichet noted that the euro zone has a higher public expenditure than other industrialized countries and efforts must be focused on monitoring public spending closely.

"It's important to...reprioritize expenses," he said, and for countries where expenditure is already high the focus should be on trimming the outflow of public money.