European Central Bank President Jean-Claude Trichet said risksignals for financial stability in the euro area are flashing “red”as the debt crisis threatens to infect banks.

“On a personal basis I would say 'yes, it is red',” Trichet saidlate yesterday in Frankfurt after a meeting of the EuropeanSystemic Risk Board, referring to the group's planned “dashboard”to monitor risks. “The message of the board is that” the linkbetween debt problems and banks “is the most serious threat tofinancial stability in the European Union.”

Trichet, who chairs the ESRB, made the remarks as Europeanleaders meet in Brussels to discuss how to stave off a Greekdefault, while preparing a second bailout. The EU is trying toavoid a repeat of the financial crisis that followed the 2008collapse of Lehman Brothers Holdings Inc. and resulted in Europeangovernments setting aside more than $5 trillion to supportbanks.