French and Germans share blame - Trichet

 

EUROPEAN CENTRAL Bank president Jean-Claude Trichet has launched a broadside against Germany and France, accusing them of sharing responsibility for the eurozone crisis.

He said slack budgetary discipline in France and Germany in the euro’s first decade had worsened the current crisis, not any decisions by his institution.

“I wish the German public had reacted with the same indignation to the breach of the Stability Pact in 2004 that they showed toward our decision to buy government bonds,” he said.

In a long profile in the Welt am Sonntag newspaper, Mr Trichet bristled at claims that, with last month’s decision to buy bonds, the ECB had crossed a red line.

The Wirtschaftswoche German business weekly suggested that the Frenchman had compromised the bank’s political independence. “When the French president whistles for more money, Jean-Claude Trichet fetches it,” it wrote.

The ECB president hit back, accusing French and German governments of failing to uphold the Stability Pact standards they had demanded by watering down penalties for excessive state deficits. “The governments were extremely unreliable, over the course of months and years,” he said.

Mr Trichet said the ECB was battling different interpretations of the same thing in various eurozone countries. He accepted there was a different perception of the current crisis in Germany because it had given up the Deutschmark in exchange for a no-bailout clause in the Stability Pact.

“The no-bailout clause means that there is no obligation for subsidies and transfers,” Mr Trichet said. “But it doesn’t mean that, in extraordinary circumstances, another country cannot be assisted.” The ECB chief dismissed concerns that Greece, Spain or Portugal might not repay their debts. “We wont allow that to happen,” he said.