Will Jean-Claude Trichet be missed?

JCT is no longer president of the European Central Bank and he leaves, after eight years at its helm, with as many detractors as there are supporters. The ECB is widely perceived as being ‘genetically’ close to the German Bundesbank following the neo-classical school where inflation is the route of all problems and so needs to be controlled no matter the cost.

However, Trichet as president broke away from this ideology when he launched the emergency government bond purchase in May 2010 to help control spiralling government borrowing costs for Italy and Spain leading to the resignation of two German ECB council members - “The ECB didn’t have to do that,” said Manfred Neumann, emeritus economics professor at Bonn University (source). For this alone, he has been lauded as (potentially) saving the Euro experiment (Trichet leaves Europe in his debt). Not surprisingly this was not enough for many including Edouard Carmignac, chairman of France’s largest independent asset management firm who last week placed a full page ad in four European newspapers on the eve of JCT’s last ECB Council meeting urging him to cut “the ECB’s key interest rate to zero and make a declaration of intent to purchase unlimited amounts of distressed countries’ sovereign debt.” (see letter below and here) The ECB decision to raise rates earlier in the year raised eyebrows (The ECB tightens the noose) despite the ongoing debt crisis and austerity across the euro zone - other commentators and well known Keynsian economists have been rather more forthright in their criticism (Are they out of their minds?! - Kantoos and that by raising rates and refusing to lower them again “the ECB may well have doomed the whole euro project.” - Krugman). Perhaps more important than Trichet’s legacy is what stance the ECB takes next and as Italy’s Mario Draghi is the next ECB president, and the Berlosconi government’s borrowing costs continue to rise after a further downgrade, the expression “to be caught between a rock and a hard place” may seem to be particularly apt.