European Affairs

Jean-Claude Trichet Surveys the Euro-- Past and Future     Print

“Don’t underestimate the resilience of the  European” or of the Euro,  said Jean-Claude Trichet, president of the European Central Bank from 2003-2011, in a wide-ranging speech last week at the European Institute in D.C.   Trichet spoke not only of triumphs but also of  problems and future challenges for the Euro, the European common currency that benefited considerably from Trichet’s credibility and leadership over  a crucial period.  (Click here for text of the speech.)

He noted that in the face of considerable hand-wringing and pessimism about the survivability of the Euro and the Euro-zone during the 2008 economic crisis,  the Euro has consistently held its value against the dollar,   and the Euro-zone expanded from 15 countries to 18 with another country, Lithuania, poised to enter early next year.   

Although at least 90 percent of commentators at the time expected at least Greece and  possibly other stressed economies to drop out of the euro-zone, those predictions were dead wrong-- a testament, said Trichet, “to the historical endeavor which is at stake.”  

Smiling slightly Trichet said that he now expects those external observers, financiers, and academics “to review a little bit their analysis.”

The European performance during the crisis was not flawless, Trichet readily concedes.  Flaws included, (1) insufficient financial governance of the Euro area, (2) insufficient monitoring and over-reliance on the market to correct competitive imbalances, and (3) the absence of a banking union with the result of a lack of credit worthiness of some countries’ banks.

Trichet noted that strong steps have been taken to remedy each of these deficiencies.

Going forward he indicated that it is crucial for the European Parliament to grow into an organization that will give “democratic legitimacy” to the European project.

Asked about crucial decisions in the past Trichet said that one “very difficult” decision was for the ECB to purchase the troubled treasury bonds of Greece, Ireland and Portugal in May 2010.   Another touch decision, of which he is proud today, was for the ECB to put up €95 billion for unlimited liquidity in August 2007.

Trichet today represents France on the board of Airbus and serves as chairman of the European think tank Bruegel.