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In an interview with Italian daily La Stampa on Sunday, Trichet said the governing council as a whole did not agree with Weber's remark last week that the ECB's government bond-buying program had not worked and should be scrapped.

"That is not the position of the governing council, in an overwhelming majority," he said.

He also struck a less hawkish note on interest rate policy than Weber, an influential member of the governing council, repeating the statement he made at the ECB's most recent press conference that current interest rates were appropriate.

Last week, Weber, one of the top candidates to take over when Trichet's ECB term expires next year, said policy makers should not wait too long before withdrawing emergency liquidity measures and raising interest rates.

Weber's hawkish comments prompted widespread speculation of divisions among the ECB's leaders and Trichet emphasized that there was "one president, who is also spokesman of the governing council."

He repeated calls for decisive action by European governments to shore up their battered public finances and urged tougher measures against countries which break budget rules, including quasi-automatic sanctions.

But he said that if a crisis threatened to re-occur, it could be useful to create a permanent structure for managing renewed turmoil after the European Financial Stability Facility, the temporary bailout mechanism set up in May, expires in 2013.

Referring to exchange rate fluctuations that have raised fears of a currency war between global powers as the dollar has fallen sharply against other major currencies, Trichet repeated warnings against excessively violent swings.

He also said it was important that U.S. authorities had confirmed their long-standing position that a strong dollar was in the interests of the United States.

(Writing by James Mackenzie; Editing by Nick Macfie)

Liu Shijin, a deputy director of the Development Research Center under the State Council, the cabinet, said China's economy would slow to a moderate pace in the coming three to five years, citing challenges from rising labor costs, excess liquidity and difficulty in finding a new source of growth.

China's economy grew 10.3 percent in the second quarter of this year after a rise of 11.9 percent in the first quarter, in what the government described as an expected moderation resulting from targeted structural adjustment.

But Liu sounded an optimistic note on the slowing pace of economic growth.

"Actually, we don't have to be too worried about an economy with moderate expansion," the official Xinhua News Agency quoted him as saying at a forum.

"Because the current economic growth is too high for China."

Liu warned that the easing monetary policy taken by the Federal Reserve would further weigh down the dollar and put pressure on other non-dollar currencies, including the yuan, to appreciate in the future.

Rich economies are introducing a fresh round of quantitative easing, fuelling speculation that rampant liquidity could be channeled to emerging markets.

He added that China's economic stimulus package also injected excessive liquidity into the market, pushing up prices of commodities, equities and other land-related assets or resources.

China's exports and investments would be much better in 2011 than this year, but the growth rate of consumption would pull back slightly from this year's boom, Liu added.

(Reporting by Aileen Wang and Tom Miles)

Bank shares fell sharply on Friday on very high volume, continuing a slide from the previous day. Although recovering some of their losses, Bank of America (BAC.N) shares hit their lowest in over a year, while the KBW bank index .BKX fell 2.4 percent.

Shares of Bank of America, the nation's largest mortgage lender, have fallen 9 percent during the week. Over 595.9 million shares of the company's stock traded on Friday, the most since April 2009 and over four times the 50-day moving average.

Investors worry banks did not follow proper due diligence when foreclosing on homes whose owners were not making mortgage payments, which could result in costly litigation, fines and additional mortgage repurchases.

Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey, said that situation could also weigh on the housing market if the uncertainty discouraged buyers from entering into contracts on properties under foreclosure.

"That speculative investor on the margin may choose to not to engage in that activity, which means there's the potential that you could have some weakness in demand, particularly in the lower-end speculative range of the housing market," he said.

BANK EXECS ON FIRING LINE

Investors will pepper bank executives with questions when those companies present earnings reports next week. Banks reporting results include Wells Fargo (WFC.N), Bank of America, and Citigroup Inc(C.N), three of the largest mortgage lenders in the nation.

The broad S&P financial sector is expected to show earnings of $27.7 billion in the third quarter, a 71 percent increase over a year earlier, although third-quarter revenue growth is seen falling 6 percent to $252.9 billion.

However, earnings estimates have been cut on some banks. Financials with the biggest reductions in earnings estimates for the quarter in the latest week are Goldman Sachs (GS.N), PNC Financial (PNC.N), and Citigroup, according to John Butters, director of U.S. earnings at Thomson Reuters.

The financial sector has been a conundrum in the latest market rally since the start of September. The KBW index .BKX has gained only 4 percent at a time when the broader S&P 500 has rallied nearly 12 percent.

David Giroux, who runs T. Rowe Price's $9.4 billion Capital

Appreciation Fund, said expectations that deflation would weigh on bank earnings in the near term was pressuring the sector. He said banks were now attractively valued and the sector is the fund's largest, making up nearly 15 percent of assets.

"Most of the large banks are asset sensitive, which means that as rates rise, their profits should rise," he said. "So if you're a big believer in deflation, which the market has become a big believer in ... financials do poorly."

Giroux said a second round of stimulus from the Federal Reserve was unnecessary as inflation was already present in the system. Hopes the Fed will pump billions into the economy has helped drive stocks higher recently.