Ralph Atkins

The competition to succeed Jean-Claude Trichet, who steps down as European Central Bank president at the end of October, was a big story in February - when Axel Weber, Germany’s Bundesbank president, withdrew from the race. Since then it has gone quiet.

Now news agency reports from the European Union finance ministers’ meeting near Budapest, Hungary, at the weekend suggest a decision may not be taken until an EU summit at the end of June. Germany’s government “has decided to form its opinion close to that date,” Bloomberg reported Wolfgang Schäuble, the country’s finance minister as saying.

That sounds plausible. Read more

Ralph Atkins

Showing masterly timing, Mario Draghi, Italy’s central bank governor - fast becoming the frontrunner to succeed Jean-Claude Trichet as European Central Bank president - has a full-page interview in today’s heavyweight Frankfurter Allgemeine Zeitung.

Its publication comes as Angela Merkel’s government scrambles to decide who it should back for the ECB job after Bundesbank president Axel Weber self-destructed last week.

Under the headline “everyone should follow Germany’s example,” Mr Draghi not only draws lessons from Germany’s impressive economic rebound. He says exactly the sorts of things a German would want to hear from a central banker – the importance of combating inflation and of pursuing stability-orientated politics, how national governments should take responsibility for sorting out their own finances, etc. Read more

Ralph Atkins

During the eurozone debt crisis, European Central Bank policymakers (unlike politicians) have generally resisted the temptation to blame financial markets for its woes. Jean-Claude Trichet, its president, has just made an exception.

Giving evidence to the European Parliament, he warned some investors had an interest in talking up the prospect of “haircuts” – or imposed losses – on Greek and Irish debt. “Investors that are ‘long’ always lose money when you practice these ‘haircuts’. Those investors who are ‘short’ make money,” he said. Read more

The euro has plummeted following the ECB press conference. Markets, it seems, were expecting a more bullish overtone from the press conference that followed today’s rate-hold decision.

FT Alphaville posted earlier on key phrases to watch for as signs of an imminent rate rise – but “strong vigilance” and “heightened awareness” were notable by their absence. Not that we – or RBS, who worked out the code words – had expected them today. Read more

The European Central Bank has struck a tougher stance on inflation, increasing the chances of an interest rate rise and sending the euro higher in spite of the eurozone debt crisis.

Jean-Claude Trichet, president, said on Thursday that the ECB had never ruled out an increase in official borrowing costs and its actions to combat inflation were “disconnected” from its steps to prop up the eurozone banking system. Read more

The euro surged higher on Thursday, hitting a one-month high against the Swiss franc after Jean-Claude Trichet, chairman of the European Central Bank, warned of inflationary risks in the eurozone.

Mr Trichet struck a hawkish tone after the central bank’s policy meeting – at which it left its main lending at 1 per cent – emphasising that the ECB was prepared to raise interest rates to keep prices stable. “Risks to the medium-term outlook for price developments are still broadly balanced, but could move to the upside,” he said. Read more

Ralph Atkins

Frankfurt-based journalists spent a convivial evening with Jean-Claude Trichet on Monday. After a grilled salmon dinner at the European Central Bank’s headquarters, the ECB president took questions for about an hour. Much of what he had to say was familiar – the misplaced scepticism (especially in the US) before the euro’s launch, the ECB’s success in keeping inflation under control, and so on. Although looking relatively relaxed, Mr Trichet did not let his guard slip. So he refused to comment, for instance, on who might succeed him when his eight-year non-renewable term expires next October.

But he was prepared to be outspoken on the need for further deepening Europe’s economic integration. Read more

Ralph Atkins

Ben Bernanke, the US Federal Reserve chairman, was forthright when he spoke at a European Central Bank conference in Frankfurt this morning. As reported on, he defended the Fed’s latest quantitative easing measures, and sought to turn the fire instead on China.

As I predicted in a previous post, Jean-Claude Trichet, ECB president, avoided any great clash with his US counterpart, whom he described as “a great member of the brotherhood of central bankers”. Others at the ECB may worry about further dollar weakness. But the ECB president repeated how US authorities also saw a strong dollar as important. On Mr Bernanke’s broader points about tackling global imbalances, Mr Trichet was also supportive.

But Mr Trichet seemed unnecessarily defensive of the eurozone at times. He interjected at one point that Europe’s monetary union was broadly in balance, even if some countries (Germany) had large surpluses. As far as I could tell, Mr Bernanke was not referring to Germany in this context at all. Read more

Ralph Atkins

Jean-Claude Trichet, ECB president, sometimes refers to the “brotherhood of central bankers”. He rarely criticises, even indirectly, his colleagues elsewhere in the world. At an ECB conference in Frankfurt that has opened this afternoon, Mr Trichet noted recent comments by Ben Bernanke, the US Federal Reserve chairman, describing an inflation rate of “about 2 per cent or a bit below” as consistent with the Fed’s mandate. The developed world’s two largest central banks “could hardly be more closely aligned” on inflation aims, he exclaimed.

But he drew a clear distinction when it came to the use of “non-standard measures” by the world’s central bankers. One view was they could be used like “engaging the four-wheel drive” once the end of the road had been reached. That was a clear reference to “quantitative easing” by the Fed.

In contrast, the ECB used non-standard measures to “remove the major roadblocks in front of us”. Read more

Ralph Atkins

With not much to decide at Thursday’s meeting - its strategy remained unchanged in spite of talk of further “quantitative easing” in the US and UK - the European Central Bank’s governing council embarked on what Jean-Claude Trichet, ECB president, described as a “literary exercise” to trim back the introductory statement he reads at each monthly press conference. I am not sure the results were entirely successful.

Vítor Constâncio, the vice-president, sitting next to Mr Trichet, looked pained when I described some of the new language as rather tortured. But I stand by my case. Read more

Ralph Atkins

Mario Draghi, Italy’s central bank governor, is profiling himself increasingly as a hardliner, especially when it comes to the banking system The ECB governing council member warned on Friday that national authorities needed to identify and act against “zombie banks” - and that the ECB’s exit strategy could not be held up by a few weak institutions dependent on its liquidity support. “The problem of addicted banks should not be addressed by the ECB but by financial authorities,” he said, according to Reuters.

“When you exit, and there is no doubt that we will exit, you want a monetary policy that is free of these constraints,” he added. Read more

Ralph Atkins

A welcome piece of good news for Jean-Claude Trichet, European Central Bank president: Estonia is about to join the eurozone as its 17th member. The entry of the tiny Baltic state has significance beyond its shores. It shows that despite all the woes of the past year, Europe’s monetary union is still on an expansion course. Mr Trichet has just been speaking in Tallinn, the country’s capital, at an event kicking off the final preparations before January 1, 2011 when the euro becomes legal tender.

His comments covered the usual themes about Europe’s common destiny and the euro’s importance in the continent’s economic integration. But Mr Trichet did not speak as if Greece had never happened. There was a stern warning that future members had to do more that just meet the technical requirements for joining (although with hindsight, it is not even clear that Greece managed that).

Mr Trichet said: Read more

Slovakia’s refusal to back the Greek loan for Greece set a bad example, and the ECB should not support euro entry to applicants that may behave similarly, Reuters is reporting. (NB. We are unable to confirm these quotations, and the ECB, when asked, had no comment to make.)

BRATISLAVA/BRUSSELS, Sept 10 (Reuters) – Slovakia set a bad example by refusing support for a loan to Greece, and the European Central Bank will not support euro entry by others unless sure they will not take similar steps in the future, ECB President Jean-Claude Trichet was quoted as saying.

A memo from this week’s meeting of euro zone finance ministers, seen by Reuters, said Trichet was outraged at the refusal by Slovakia to participate in the Greek bailout.

Several EU officials said privately Slovakia could be snubbed by some of the 26 other EU member states because its decision is likely to complicate talks on the bloc’s budget, making the rich net payers less willing to grant aid to poorer countries.

“Trichet was outraged at the last Eurogroup by Slovakia’s refusal of a bilateral loan to Greece and said that had the ECB known Slovakia would behave like that, it would not have endorsed Slovakia’s euro adoption,” the memo summarising the discussion said.

 Read more

Ralph Atkins

In his Financial Times interview, published today, Jean-Claude Trichet suggested the mood on the US economic outlook was “too negative”. The European Central Bank president was probably referring to the quite short-term.

A speech by Lorenzo Bini Smaghi, an executive board member, just posted on the ECB’s website, suggests the Frankfurt-institution is itself rather gloomy about longer-term US prospects. Read more

Ralph Atkins

Jean-Claude Trichet, the European Central Bank’s president, has grabbed a lot of attention in today’s European media for his proposal, made in an interview with the Financial Times, that fiscally irresponsible eurozone countries have their voting rights suspended temporarily. As I expected, some see his idea as straying too far into the political arena.

But, as ever, Mr Trichet was careful with his words in the FT interview, and his proposal has a fair chance of succeeding.  Read more

The following is an edited version of an FT interview

“I don’t think that the euro area was close to disaster at all – seen from inside,” Jean-Claude Trichet tells Ralph and FT editor Lionel Barber. The ECB president argues that outsiders – traders in financial markets in London or New York, say – have misunderstood the eurozone and the forces that bind together the monetary union. Read more

Ralph Atkins

Jean-Claude Trichet, European Central Bank president, said yesterday’s decisions on future liquidity operations had been reached by “consensus”. To some ears, that might sound like there was a big split. In an Anglo-Saxon context, a consensus might be seen as simply “more than half”.

I think that is wrong. When Mr Trichet talks about a decision being made by “consensus,” my understanding is that that means there was some initial resistance but in the end everyone was able to support the final decision. It is a notch or two weaker than a decision agreed “unanimously”. Read more

Ralph Atkins

The European Central Bank appears to have entered calmer waters, at least for now. With the eurozone economic recovery on track, Jean-Claude Trichet, president, wanted to keep the optimism in check at his regular monthly press conference this afternoon.

Perhaps, the ECB had learnt a lesson from the false hopes created in the US? But it is easier to be cautious when things are going well, than to try to spread a little optimism when things are going badly. Read more

Ralph Atkins

Did I detect a slight fin de siècle feel to Jean-Claude Trichet’s comments in Jackson Hole? The European Central Bank president did not talk about monetary policy – he is in “purdah” ahead of next Thursday’s ECB council meeting (and, anyway, would not have wanted to distract from Ben Bernanke’s comments). Instead, he talked mostly about the urgency of reducing indebtedness in the private and public sectors.

But in the last part of his speech – entitled “central banking in uncertain times: conviction and responsibility” – Mr Trichet took a philosophical approach to  the challenges of heading a central bank at a time of turmoil. It appeared a little like a summary of his time in office. By the time central bankers gather in Jackson Hole next year, it is likely a successor will have been chosen to take over at the ECB when his non-renewable term ends in October 2011.

One observation made by Mr Trichet was that policymakers win praise if they are seen as being effective in combating a crisis that has erupted. But they win little recognition for taking tough decisions that prevent a crisis in the first place. Read more

Ralph Atkins

Just a few months ago, Jean-Claude Trichet, the European Central Bank’s president, would have felt some trepidation about spending a weekend with US counterparts. Back then, Europe’s debt crisis was troubling the world, and Washington was piling pressure on European policymakers to take firm action to stabilise the crisis.

Today, it will be a more confident Mr Trichet who addresses the central bankers’ summit in Jackson Hole, in the US. In Germany, where the ECB is headquartered, the economy is powering ahead, with scant signs of anything more than a modest slowdown after an exceptional second quarter performance. Eurozone prospects overall have brightened as a result. For the global economy, a slowdown has been factored in – but a dangerous “double dip” is not foreseen.

Instead – at least from a European point of view - the onus is now on US policymakers to address the weaknesses in its economy. No doubt, Mr Trichet will be as charming as ever, but his perspective is different to that of his US hosts. Read more