Global Financial Strategy - Jean-Claude Trichet, President of European Central Bank

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Jean-Claude Trichet, President of European Central Bank

Wednesday 19 January 2011 – by Andrew Hickley

With a year behind him bailing out stricken EU countries, battling financial markets and pushing for changes to financial governance, 2010 marked Jean-Claude out as more of a Van Damme than a Trichet. The central banker ranks third in the GFS Power 50.

The former Governor of the Banque de France has gone through arguably his most productive year since becoming President of the European Central Bank in 2003 – only the second in the central bank’s lifetime. In spite of sovereign debt problems that have plagued the continent, he has consistently claimed that Europe is in better shape than investors give it credit.

The unabashed Frenchman has clashed with heads of government, particularly as Germany and France attempted to water down European governance rules, arguing that a “quantum leap” in governance is in fact needed. He has also cautioned against the Paris-Berlin led efforts campaigning for bondholder bail-ins, though these were eventually proposed at the start of 2011.

Trichet led an about-turn on purchasing bonds as the European economy dwindled in early May, committing the bank to a series of auctions to provide governments with extra liquidity. The auctions, which were still in full-swing less than a week ago with an investment in Portuguese bonds, total €74bn ($95bn) since the Greek banking crisis.

According International Monetary Fund managing director Dominique Strauss-Kahn, the bond purchases have performed “perfectly” in reinforcing price stability in the euro area, alongside measures to control interest rates.

As a sign of his pre-eminence, the Frenchman was elected as the inaugural head of the European Systemic Risk Board – a move which MEP Ramon Tremosa said risks both his “reputation and credibility in achieving an effective financial stability in Europe”.

Related articles:

In brief: Weber touts EU clearing house

King takes key role at EU Risk Board

Trichet: EU model needs strengthening

Trichet: Lack of ‘boldness’ in Council’s plans

ECB chief warns against international ‘complacency’

Having argued that banking stress tests should have been conducted sooner, the ESRB and Trichet himself will be tasked in 2011 with pushing through stress tests for both banking and insurance sectors during the summer, after the first round embarrassingly concluded that Irish banks were healthy.

For all the central bank’s work over the year, Trichet has his critics. Irish justice minister Dermot Ahern blasted the ECB for its role in pressuring Ireland to take a bailout before the country had even considered the option itself, also accusing him of having the same belligerent stance towards the Portuguese economy.

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