An Anglo Saxon plot against the Euro? Interview with Jean Claude Trichet

The following quotes come from an interview with Jean Claude Trichet, President of the ECB on May 31st 2010. Perhaps the most significant comment comes in the context of the conduct of the financial services industry with this very outspoken view:

"I am deeply concerned by this gulf between the values of our democracies and those of the financial world, reflected particularly in the abnormal behaviours observed so often in recent years. This problem is faced by all of our democratic societies, and certainly on both sides of the Atlantic. The values of the financial world must change. In the prevailing ethos, they will no longer be tolerated as they are".

Not surprisingly Monsieur Trichet would not be baited into a discussion about a Plan B should Greece "fail". If, for some reason, Greece does not honour its commitments, might there be a need for a "plan B"?

That is not part of our working assumption. Greece must and will honour its commitments. The European Commission, together with the ECB on the one hand and the IMF on the other, is following developments in the recovery programme very closely.

And finally, just to set the context for this rather remarkable question, the interview took place between M. Trichet and three French journalists. Sometimes, one imagines a sort of Anglo-Saxon plot against the euro. What do you think of this?

No, one should be wary of any conspiracy theories. I simply believe that some international investors struggle to understand Europe and its decision-making mechanisms. They have difficulty in gauging the historical size of the European construction and in anticipating the capacity of Europeans to take decisions that are just as important as those taken a few days ago.

It takes a far more febrile imagination to conjure up the notion of an Anglo-Saxon plot to attack the euro than it does to imagine that the structural weaknesses of a currency union without a political union, could ultimately see the EMU falling apart.

The large intraday "crash" from May 6th no longer looks like an aberration but, strangely suggests a forward looking market that uncannily may have been discounting the possibility that the second most traded global currency could be coming apart at the seams. If it does, and in some ways this would be the preferred solution for not only the Club Med countries but also for Germany, it will once again highlight the folly of our belief in the robustness of the creations of financial technocrats. A monetary union without a fiscal union lacks credibility and it may, in years to come, be seen as remarkable that, with only a 10 year track record, so many placed so much faith in the Eurozone arrangements.

On the other hand, when I remove my Armageddon hat, which has a nasty tendency to appear on occasion (somewhat like Doctor Strangelove's salute), there is always the possibility that a new fudge will buy more time for the political elite of Europe to spin some new schemes for European unification. If, as in the past, European voters give the wrong answers when asked in a referendum about further integration, they simply hold additional referendums until they get the right answer.

But maybe next time it will be different.