A moment in monetary policy history! Jean-Claude Trichet has just delivered his last scheduled speech as European Central Bank president. Addressing Berlin’s Humboldt university he did not produce any fireworks - there was no attempt to bounce Italy’s Mario Draghi into a rate cut at next week’s ECB governing council meeting. Instead Mr Trichet pushed his ideas for Europe’s future political union.
Earlier this year, Mr Trichet advocated a European finance ministry – an idea on which he expanded in his interview with the Financial Times earlier this month. The case for such a step had strengthened in recent weeks, he argued in Berlin – and he went further in arguing for a new kind of European federal system. Read more
Andrew Tyrie, the chairman of the Treasury Committee, is concerned that banks are at risk of a severe liquidity drought, and wants “reassurance” from the Bank of England and the Financial Services Authority that they are “examining carefully” what they can do to ensure we don’t get a repeat of the 2008 panic.
His fears of a liquidity shortage are warranted. But he is wrong to target the Bank and the FSA in his letters to Hector Sants, the FSA’s chief executive, and the governor. Read more
Lorenzo Bini Smaghi has the European Central Bank’s lawyers on his side. He is under pressure from Nicolas Sarkozy to step down as ECB executive board member. The French president argues that when Mario Draghi takes over as ECB president next week, there will be too many Italians on the board.
But Silvio Berlusconi, Italy’s prime minister, has yet to find a suitable alternative job for his compatriot (the Italian central bank governorship has gone to Ignazio Visco, its third-in-command). He has tried appeals to patriotism, without any apparent effect on Mr Bini Smaghi. “What should I do, should I kill him?” Mr Berlusonci said he told Mr Sarkozy in Brussels at the weekend.
Italy’s Corriere della Sera newspaper reports today that an internal legal ECB legal opinion, which I understand was reported faithfully, makes clear that a departure of an executive board member cannot be tied to the arrival of another. Read more