The head of the European Central Bank says governments should be "rigorous" in their budget policies.

Jean-Claude Trichet said Sunday that governments have to juggle a declicate balancing act when setting spending and tax guidelines.

They need to instill confidence in households so they keep spending, in companies so they keep investing, as well as in savers and investors.

That requires a "very attentive" control of budgets, he told reporters at the sidelines of the Rencontres Economiques conference in southern France.

Trichet dismissed the possibility of Europe slipping back into recession and said budget cuts and structural reforms would help economic recovery while bank stress tests would help restore confidence.