Jean-Claude Trichet Sidelined In The Current Euro Zone Crisis

The Wall Street Journal reports that ECB President Jean-Claude Trichet, who is considered to be an architect of the European monetary union, found himself sidelined by euro-zone capitals as Europe faces its biggest fiscal crisis in decades. Trichet’s efforts to shape the response to the fiscal crisis failed as Europe struggled to find a solution for the crisis in Greece, which ended on Sunday after an extraordinary meeting of euro-zone finance ministers.

Trichet appeared out of sync with euro-zone capitals and his advice went unnoticed time and again, just as his opposition to the International Monetary Fund’s involvement in a bailout and his call for a unified oice for governments went unheeded. Philip Whyte, senior research fellow at the Centre for European Reform, a pro-European think tank based in London, says, “The problem now is he's in charge of an institution which is supposed to be the guardian of the euro, but a lot of the decisions that are going to affect the future of the single currency are out of his hands.”

Analysts believe that Trichet’s lack of control could dilute the role of the ECB president’s office and also raise questions about the ECB’s ability to effectively respond to future issues. With the pain of the recession still felt by many euro-zone nations and politicians, especially in Germany, proving reluctant to a call from Trichet for an immediate and resolute response to the debt crisis in Greece, the support for EU and the concept of a common currency has lost its popularity in places like Germany. The Greek crisis has also exposed the divisions between those who advocate closer economic and political integration and those who believe in preserving their sovereignty.

Meanwhile, according to economists, the role of the Federal Reserve in contrast to the ECB has grown in the aftermath the financial crisis. Even though the Fed’s chairman, Ben Bernanke’s, policies and views have been criticized, his views on the economy, fiscal and monetary policy still bear substantial weight among policy makers and the public at large. Marco Annunziata, chief economist at UniCredit Group, says, “The ECB has an outstanding reputation, but the governments have pretty much ignored it and then dragged it along, and you lose faith in euro-zone policy making if what looks like the strongest institution is marginalized.” However, Trichet’s contributions to the euro-zone and the ECB cannot go disregarded. He has been an influential factor behind keeping inflation low and has earned praise from economists for his handling of the financial crisis.