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ECB in a Fix, Trichet is as Chill as Ever!

Interest-Rates / ECB Interest Rates Feb 08, 2010 - 07:33 AM GMT

By: Vishal_Damor


Best Financial Markets Analysis ArticleTrichet is one of the stalwarts of the economic crisis of 2008. He steered the EU economy through one of the most difficult eras after its creation and yet has maintained one of the cleanest balance sheet (Deficit 6% of GDP: one can almost mistake it for China or India Balance sheet).

While the foolish jokers in the US (Geithner and Ben Bernanke) were on their knees pleading for bailout money, Trichet displayed an uncommon calm and yet a brilliant genius as he decided not to go ahead with any kind of asset purchase program or QE which was so fervently pitched as the keynesian solution to world depression staring at us in 2008.

Maybe some day there can be a Harvard Business School case study of Trichet actions.

Coming to Greece problems, a look at government debt across the world:

Source: New York Times
Greece is scary on government debt comparisons level , but the more correct metric to look is overall debt levels including public debt which is reaching nearly 150 % of GDP for the US.

Having said that, Greece still needs a solution and Trichet is as confident as ever. I will back him any day to solve the little piddly issue of Greece budget problems which the bond market have magnified it to an unbelievable magnitude.

Greece and EU politics

As investor alarm about Greek, Spanish and Portuguese indebtedness increases, the crisis has highlighted the fundamental weakness of the European monetary union. With no strong political arm to ensure that members observe debt limits set by treaty, the responsibility falls to Mr. Trichet to try to resolve the crisis.

Mr. Trichet told reporters at a meeting in Canada of the Group of 7 finance ministers and central bank presidents that he was confident that Greece would meet tough new belt-tightening goals.

“We expect and we are confident that the Greek government will take all the decisions that will permit it to reach that goal,” Mr. Trichet said, according to Reuters.

Trichet compares the State of US debt levels: This is the best part

In a gesture that did little initially to calm nervous investors, Mr. Trichet pointed out that the overall deficit level among euro countries, at about 6 percent of gross domestic product, was still well below that of the United States and Japan, which are each set to borrow more than 10 percent of their G.D.P.’s this year.

Mr. Trichet delivers such comments in excellent English with a distinct French accent. Though he can be stern, he sometimes displays a dry sense of humor. Before the G-7 meeting on Saturday, he joked that by gathering in frozen Canadian territory, “we will have just the right environment to be as cool as possible in judging the situation.”

Trichet on US and why US never gets asked about Alaska?

Mr. Trichet sometimes maintains that problems with individual euro nations should be of no greater concern to Europe’s central bank than the fiscal problems of an individual state are to the Federal Reserve in Washington. After being peppered with questions about Greece on Thursday, Mr. Trichet responded: “I doubt that, in a press conference, Ben Bernanke would have a question on Alaska or Massachusetts.”

I really like the way he puts his accent.

But I am backing Trichet to the hilt here.


Vishal Damor

Vishal Damor, works for an emerging market financial consulting firm and is the editor at INVESTING CONTRARIAN, a financial analysis and reporting site covering commodities, emerging markets and currencies.

© 2010 Copyright Vishal Damor - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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