EUROZONE Central Bank (ECB) president Jean-Claude Trichet, yesterday insisted that the euro was not in crisis.
Speaking at Davos’ Open Forum, a venue open to the public alongside the World Economic Forum, Trichet insisted that the ECB had a track record of success shown by the fact that average inflation during the period of its existence has been 1.9 per cent.
However, he admitted that the bank had focused mainly on core countries like Germany in its policy, despite negative real interest rates in others like Ireland.
Shortly before his remarks, French President Nicolas had taken the floor to launch an ardent defence of the single currency. “To those who would bet against the euro, watch out for your money because we are fully determined to defend the euro,” he said. “Mrs Merkel and I will never – do you hear me, never – let the euro fall.”
His reference to an alliance with Merkel is particularly significant because together France and Germany are viewed as the only countries able to bankroll further bailouts.
Policymakers are at pains to project an air of determination ahead of a European Council meeting in February, when they will unveil a raft of measures intended to rescue the euro.
But in Trichet’s comments at the Open Forum, held in a packed school gym in Davos, he admitted that saving the currency will require limiting national sovereignty on spending.
“It was foreseen from the beginning,” he said. “You need to have a quid pro quo if you have a single currency without a political confederation.”