May 19, 2011
For all his Gallic charm, Jean-Claude Trichet has lately become a troublesome guest at official European dinners. When top eurozone finance ministers met in Luxembourg late on a Friday earlier this month to discuss the Greece crisis – a supposedly secret meeting, the existence of which was soon leaked – the European Central Bank president did not stay long. Angered at the politicians’ discussions about a restructuring of Greece’s debt, he walked out.
This week, the ECB’s fierce opposition to Greece’s delaying debt repayments has erupted into a full-blown and public dispute. Egged on by the German government, Jean-Claude Juncker, the Luxembourg prime minister who also chairs meetings of eurozone finance ministers, floated the idea of a “soft” restructuring, which could include a voluntary extension of Greek debt maturities.
In response, ECB policymakers accused him of “using meaningless phrases”. A debt restructuring would spell catastrophe for Greece, the bank warned, with severe consequences for the rest of the eurozone. Jürgen Stark, executive board member, made clear that in such circumstances downgraded Greek assets would have to be excluded from use as collateral in return for ECB liquidity – in other words, the ECB might be obliged to bring down the country’s financial system.
That might have been a bit of bluff. Still, even for a central bank that guards its independence fiercely, the tone has been strident.