Trichet: No, not necessarily. The ministry that I have in mind for the future shouldn’t have a large budget.
SZ: How, in your view, should the current debt problems in Europe be resolved? You are something of an expert on debt – after all, you previously played a leading role in the Paris Club in negotiating the debt restructuring of Brazil, Poland, Egypt and the Soviet Union. This always involved partial losses for creditors, or a “haircut”.
Trichet: Our position for Europe was always clear. We were not responsible for the negotiations concerning Greek debt. That was the task of the governments. We will monitor events closely.
SZ: Two years ago, you said that the entire regulation of the financial system needed major improvements. Has this already happened, or does more need to be done?
Trichet: We are half-way there. There has been a global increase in the capital requirements for banks, including those that are systemically relevant. What is still open is how we deal with other financial entities that are non-banks, what we sometimes call the shadow banking system. More transparency and appropriate oversight are needed here. Conflicts of interest must be eliminated. There are also still too many pro-cyclical elements in the financial system that should be eliminated. All of this is hard work, and we still have to make a lot of progress
SZ: The banks are moaning about too much regulation.
Trichet: I do not accept the idea that we have over-regulation. We have in any case an absolute obligation to make the financial system much more resilient. The idea of going back to business as usual is deeply inappropriate.
SZ: Is the euro still an important factor in the integration of Europe? Or is it now causing divisions?
Trichet: I believe that the euro is crucial to the achievement of a single market. Do you think we would consider the United States’ single market complete if the money used in North Carolina were different from that used in Wyoming, California or Florida?
SZ: After eight years as “Monsieur Euro”, as the top central banker, do you leave any kind of legacy?
Trichet: My colleagues and I are very proud of the fact that, in the first 12 years of the euro’s existence, we have been able to keep prices stable for 331 million people. That is our mission and our mandate.
SZ: How does it fit into your mission that the ECB suddenly began, in May 2010, to buy government bonds from indebted countries such as Greece, Ireland and Portugal? The ECB had previously rejected such a policy. Was it a mistake?
Trichet: Certainly not. It was one of our “non-standard” measures that we introduced together with the policy of refinancing banks at fixed interest rates with full allotment of bids, and the Covered Bond Purchase Programme. All these measures, without exception, were designed to help restore a better monetary policy transmission at a time when markets were disrupted. At the same time, we completely separated these measures from the interest rate decisions – our “standard measures” are entirely designed to deliver price stability. This separation principle is for me absolutely fundamental.
SZ: The euro area countries have set up a rescue fund, the European Financial Stability Facility, soon to be called the European Stability Mechanism. What do you think of the idea of this fund taking over the government bonds held by the ECB, which are worth €75 billion? Your balance sheet would then be clean again.
Trichet: It goes without saying that the governments will have to redeem their bonds that are on the balance sheet of the Eurosystem without any change. Of course, being part of the official sector, we will not be participating in the voluntary private sector involvement mentioned on Thursday as regards Greece.
SZ: Some even say that the ECB is a “bad bank”, speaking as if it were Goldman Sachs, BNP Paribas, Unicredit or Deutsche Bank, conducting securities transactions on its own account.
Trichet: That is clearly absurd. We are the central bank for 17 countries in a single market with a single currency. And our integrity is fundamental and fully protected.
SZ: Critics even say that the ECB and President Trichet are against debt restructuring because you have taken too many risks onto your books and would then need to write down losses.
Trichet: That is ridiculous. The integrity of the ECB and the Eurosystem is fundamental and fully guaranteed.
SZ: Mr Trichet, you have lived in Germany for eight years and so know both the Germans and the French very well, nations that were enemies until the end of the Second World War. How well do you think these two core euro area countries get on now?
Trichet: Yes, there were wars, but the two neighbours were frequently also friends and lived closely together. Charlemagne ruled the Germans and the French in one country. Three citizens of the small Breton town St Malo, to which I am closely attached, were, for example, members of the Berlin Academy under Frederick the Great! And the two nations know that their friendship is fundamental when it is put to the service of Europe as a whole.
SZ: Is this shared history enough, or will there soon need to be noticeably more shared undertakings?
Trichet: The successes of European unification over the last 60 years have been considerable. What we have today is, after all, what the euro’s founding fathers dreamed of. We have to make further progress along this historic path.
SZ: Can your two sons and granddaughters understand this?
Trichet: My sons are convinced Europeans. But I notice that today’s generation takes the success of the European Union and the euro as a given. We have to explain that if we have had peace, stability and prosperity over the last 66 years, it is not by chance, but because of Europe.
SZ: Germany and France could begin by having a joint finance minister in order to liven things up.
Trichet: (laughs) Do you think they are already ready for that?