Trichet shrugs off ECB concerns

Jean-Claude Trichet

As investors continue to express concern over Greek, Spanish and Portuguese indebtedness to the EU, analysts debate whether the crisis is highlighting the fundamental weakness of the European monetary union.

Analysts are concerned that the European Central Bank (ECB), who's sole responsibility is to keep inflation within the EU in check, will suffer because it technically holds almost no formal policy tools to help an ailing member country such as Greece.

In fact, the concerns go even higher, speculating that, with no strong political arm to ensure that members observe debt limits set by treaty, the responsibility falls to ECB Jean-Claude Trichet to try to resolve an ensuing crisis.

Tough new goals

The concerns surfaced after Trichet's discussion with reporters at the weekend, where he said he was confident that Greece would meet tough new belt-tightening goals. His words, which came as part of a meeting in Canada of the Group of seven finance ministers and central bank presidents, went on to explain how, "we [the ECB] expect and are confident that the Greek government will take all the decisions that will permit it to reach that goal.”

Trichet had previously lectured European governments on the need to swiftly pare their budget deficit just days earlier. "When you share a single currency with others, the counterpart is that you have to have a sound fiscal policy," he said.

However, according to reports in the New York Times, Trichet also pointed out that the overall deficit level among euro countries, at about six percent of GDP, was still well below that of the United States and Japan, which are each set to borrow more than 10 percent of their GDP's this year.

In fact, Trichet seemingly maintains that 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.

Yesterday, in an effort to quash fears over a possible crisis, he chirpily retorted, "I doubt that, in a press conference, Ben Bernanke would have a question on Alaska or Massachusetts."

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