European Central Bank President Jean-Claude Trichet used his last scheduled speech to push for a single euro-area finance ministry. Students in the audience used it as an opportunity to protest about the debt crisis, some waving placards and booing Trichet.
With the crisis still raging as his eight-year term at the helm of the ECB comes to close, Trichet said the case for a common finance ministry has “strengthened” to improve economic governance in the 17-nation currency bloc.
A woman began shouting as Trichet spoke in an auditorium at the Humboldt University in Berlin late yesterday, causing him to stop briefly before resuming. Banners were held up by students in the audience reading “no more money for the banks” and “say no to debt tyranny,” and boos were heard during applause at the end of Trichet’s speech -- the last scheduled before he steps down on Oct. 31.
European leaders are struggling to find a solution to the sovereign debt crisis that’s forced governments to introduce austerity measures, damping the economic outlook. In Greece, the epicenter of the turmoil, aggressive government spending cuts have led to civil unrest. The euro-area unemployment rate is currently at 10 percent.
470 Euros a Month
Another woman in the audience last night asked Trichet if he “could live on a wage of 470 euros ($655) a month.” Trichet, 68, said the “main issue” policy makers face is ensuring “that we are as close as possible to giving a job to all our people, including our young unskilled people.”
Trichet said he is “very happy” that heads of government at a weekend summit signed up to the idea of stronger economic convergence and even the possibility of limited changes to the euro’s founding treaty.
“The euro area is responding to events of historical importance and it naturally takes time to forge consensus on the right way ahead,” Trichet said. For now, “first and foremost every country in the euro area needs to keep its own house in order.”
From the ECB’s perspective, the central bank needs to fulfill its primary mandate of maintaining stable prices, Trichet said. The ECB has also introduced a number of non-standard measures to address the crisis, including flooding the banking system with cheap cash to prevent a credit crunch and buying government bonds on the secondary market.
“Of all our non-standard measures, the policy of full liquidity allotment at fixed rates has been the most important one in my view,” Trichet said in his speech. “Yet it is the bond market interventions that have received the greatest attention, and the most scrutiny.”
The ECB was forced to start buying Italian and Spanish government bonds in August after the debt crisis pushed the nations’ yields to euro-era records. The policy has caused a split on the ECB’s Governing Council. Chief economist Juergen Stark on Sept. 9 announced he will resign from the ECB’s Executive Board in protest at the purchases, and council member Jens Weidmann said last month the bank should reduce the risks on its balance sheet rather than increase them.
Trichet reiterated yesterday that the unconventional measures are “transitory” and aimed purely at ensuring the transmission of the ECB’s interest rates on financial markets.