The Man Who “Bounced” Us Into The Bailout


Jean-Claude Trichet, former European Central Bank president and the man behind those ECB letters, appeared on CNN yesterday.

He didn’t talk about the letters:

“Trichet also praised Ireland for the steps its government has made to stimulate the country’s economy in an effort to return to international bond markets next year. “Ireland needed the help of the International Monetary Fund and Europe… It is one of the countries that have really done the job to get back to competitiveness,” Trichet said. But he refused to speculate over letters he sent in 2010 to then-Irish Finance Minister Brian Lenihan, weeks before Ireland requested a bailout. “These were messages that were confidential at the time.”

But he did have this to say:

Jean Claude Trichet: “When you embark on a non-standard measure and there are non-standard measures in Japan, there are non-standard measures in the US, there are non-standard measures in the UK. I mean all of the advanced economies have embarked on non-standard measures. It seems to me that it is justified if you are in a situation where obviously you have the markets that are not functioning correctly. So you have to substitute, or to counter, markets that are not functioning correctly and are hampering the transmission of the monetary policy. But it also gives time to the other partners which are not on either governments  and their policies, but also the private sector. And the message of the central bank is, and rightly so, we are understanding that you are doing all what is necessary to get back to a normal situation and it is on that understanding that we are doing some non-standard measures. But it should be exactly appropriate to the situation, to the disfunctioning of the markets and, of course, on the basis of the hard job being done by the other partners. Otherwise it would only serve as permitting them, not to correct the absurd policies that have been pursued in the past or the imbalances that have to be corrected today.”

CNN: “In the last few weeks there’s been what looks to me and a lot of people, as a lot of tension between those from the Bundesbank inside the ECB and the decisions that seem to be getting made. Do you see a rift inside the ECB now? And was there a lot of tension between the German members of the ECB and your team and others?”

Trichet: “Well first of all, in all decision-making bodies of the central banks, you have pros and cons. As you know it is published in the UK, or in the US, or Japan and it’s very, very often that decisions are taken by a majority and there is a minority. A minority has its own view. That’s the way  things are, I would say, constructed in most banks. But of course in the case of the European Central Bank, we have 17 countries and the decision was taken at the very beginning that of course we would have discussions. There would be a majority, a simple majority is the way the treaty has imagined to organise the council of governance of the ECB. But it was decided at the very beginning that we would all speak with one voice. Because precisely it is sufficiently, it’s a sufficient challenge to have to cope with the 17 countries. I personally regret that we could not stick to this one voice concept but it is the case. I mean I observe that. And I’m sure that, I would say all members of the governing council are speaking with their own, you know, sincere analysis of the situation. It is not necessarily abnormal that we have different views as is the case in the US or in Japan. But I trust that all, of course, colleagues are loyal to the institution. We have a treaty and we have to respect the treaty. We have an exceptional situation, we have to stick to our mandate which is the primary mandate of preserving price stability. This has been done remarkably well by the ECB in its first 13/14 years, almost 14 years. Remarkably well – better than in the past of any central bank over the past say 40 years or 50 years. So we have to recognise that. This is a success of the central bank itself. That being said we are in situations that are absolutely exceptional at the global level and of course at the European level.”

CNN: “But, as you said, we now see the crack. We’re don’t hear one voice coming from the ECB anymore. That must be worrying to you?”

Trichet: “Well again, I experienced that myself and I have full respect for all my colleagues. I understand fully there own rezoning. I have to say that what I had observed in my time and I’m sure that it is still the case, they are loyal, all of them. And I’m not speaking of any particular member of the governing council. I think it’s loyalty to the institution. After all, all of the democracies in Europe have decided, apart from the UK and Denmark decided that we would have the ECB, the European Central Bank and the single currency and that is what we’re going to do by our democracies. So loyalty to the institution seems to me to be absolutely essential. The fact that each member of the governing council speaks itself in the governing council, in its own views and own analysis is something which is indisputable. I would hope that in a very difficult period, a crisis period, we remain as, I would say, as cautious as possible.”

Trichet: Bond Buying Program May Be ‘justified’ (CNN)