Praising Mr. Euro

For eight years, Jean-Claude Trichet, head of the European Central Bank (ECB) has been "Mr Euro."

His role in stabilizing the European single currency has won him this year's Charlemagne Prize - an annual honor for services to European unity which is awarded in Aachen.

The prize-giving committee, who have previously honored German Chancellor Angela Merkel and Polish Prime Minister Donald Tusk, said Trichet symbolized the solidarity of the eurozone project and honored his contribution to "the cohesion of the monetary union."

In his acceptance speech, the Frenchman made a case for the establishment of a central finance ministry to prevent another financial crisis.

"In this Union of tomorrow, or of the day after tomorrow, would it be too bold, in the economic field, with a single market and a single central bank, to envisage a ministry of

finance of the Union?," he said in a speech.

Trichet acknowledged a central ministry would require sweeping changes in the European Union, including a revision of its underlying treaty.

Defending the euro

Trichet joined the ECB in 2003 after serving for 10 years as the president of the Bank of France. Although his profession is as a banker, Trichet had a broad education. He earned a diploma in political science and worked as an engineer, as well as earning his economics degree.

In his time as ECB president, Trichet has relentlessly lobbied for the euro and the stability of the European single currency. Not an easy task, given the weight of the debt crisis across Europe.

In April, the ECB made the surprising move of increasing interest rates to 1.25 percent - the first rise in two years. The move was a surprise, as many commentators suggested that increasing interest rates would have an adverse effect on struggling economies like Portugal.

However, Trichet was adamant that price stability was at the core of the issue, and a small hike in interest rates was a "balancing act" in response to the risk of accelerating inflation.

"We cannot change the price of oil, or the price of commodities, but we can avoid creating inflation in the medium term," Trichet said in April.

This medium to long-term stability has been Trichet's primary goal, and avoiding inflation is a responsibility to citizens he says he takes seriously.

"They can trust that we are speaking for real when we say we will maintain medium-term price stability," he said.

Trichet's admirers

By having this stability as his prime objective over his eight-year tenure as ECB president, Trichet has won several admirers.

"He has implemented a very sound policy and done a good job," said Michael Heise, chief economist at the Allianz Insurance Group.

Heise argued that Trichet has done well in managing long-term inflation expectations, which are "the ultimate indicator of credibility."

"I believe that through Trichet, with his insistence on price stability, the ECB has made a vital contribution."

Not everyone's a fan

Heise's high opinion of Trichet is not shared by everyone, including the former president of the Bundesbank, Axel Weber.

Weber was among those shocked by the ECB's decision in May 2010 to buy up Greek government bonds, not just from the Greeks but from several other debt-ridden eurozone countries. It was seen as breaking the major taboo of meddling with the independence of the ECB.

However Heise argued the central bank had to do something to calm the markets, and anticipate that just one aid package for Greece probably would not be enough.

The prize

Although Trichet alone is being awarded the Charlemagne Prize, the Frenchman is adamant that the work in stabilizing the euro was shared by a team.

He is also quick to point out that it was through "skill and perseverance" rather than luck that the euro is where it is today."

Trichet will remain in his role at the ECB only until October this year, to be succeeded by Italian Mario Draghi.

Author: Brigitte Scholtes / cb
Editor: Martin Kuebler