Trichet Handed the Reins at ECB

The wait is over for Jean-Claude Trichet. European Finance ministers have officially announced on Tuesday that the governor of the Banque de France will become the new head man at the European Central Bank (ECB). Trichet, a former deputy governor with the International Monetary Fund (IMF) and World Bank, will take over the hot seat in Frankfurt from outgoing president, Wim Duisenberg. Trichet’s appointment has a tenure of eight years beginning on November 1, 2003.

At a time when the eurozone economies are suffering from sluggish performances and borderline recessions, the 60-year-old poetry loving Trichet is seen as the man with élan who could help revive the ECB through French inspired reforms. A banker who commands almost universal respect throughout the sector and does business with what many have called “a certain chic allure,” it is hoped that Trichet’s appointment will bring stability to the euro zone and help placate skeptics across the continent.

A long time coming

It is an appointment that many expected in 1998 when the top job at the ECB was created. One of the world's most-respected central bankers, Trichet was overlooked in favor of the more awkward Duisenberg in what was perceived at the time as a political stitch-up. German officials had allegedly become nervous over the idea of having a Frenchman at Europe's economic helm, and apparently insisted on Duisenberg, a Dutchman.

Now, after some not so gentle maneuvering which led to an agreement that sees Duisenberg stepping down halfway through his term, the Franco-German EU axis remains intact and Trichet has the job at last. Duisenberg will clear his desk out this summer after agreeing last year to vacate the position.

Political rise

But it almost didn’t happen for Trichet. After a career that had seen him rise through a number of political posts in the French government’s finance ministry, culminating in the top job at the Treasury in 1987 and head of the Banque de France in 1993, Trichet entered muddy waters. Three years ago, he was put under investigation, accused of complicity in producing misleading accounts for Credit Lyonnais while at the Treasury during the 1980’s.

The then state-owned bank had a reputation for lending money exuberantly and plunged into the red when many loans turned. It is alleged that government and company officials helped Credit Lyonnais concoct false accounting records to disguise its losses.

Cleared in scandal

Trichet was one of nine men put on trial for their part in the Credit Lyonnais affair, which culminated in a €31 billion ($33.7 billion) bailout by the French government. In the end, the court cleared Trichet involvement in the banking scandal last month. Now his appointment seems an assured and popular choice.

With his conservative views on monetary policy, he is seen as one of the few men capable of prompting much-needed reform within the ECB. Trichet will bring ideas popular with the French government’s views on how the ECB should be run with plans for a slimmer administration, more transparent workings and a more realistic inflation target based on the Bank of England model.