Saturday profile: Jean-Claude Trichet

Three months before he retires from the helm of the European Central Bank, the engineer turned economist faces his toughest test yet. By John Lichfield

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The Independent Online

Almost everyone accepts that Jean-Claude Trichet is a brilliant man. He can, however, be startlingly naive. A few years ago, the European Central Bank governor told a British acquaintance how much he appreciated the humour of Ali G. When told that "Ali G" was actually a Jewish comedian educated at Cambridge University, Mr Trichet's jaw dropped in astonishment.

This week, Mr Trichet, three months from the end of his career as a French, international and European civil servant, is alleged to have committed a far more serious misreading of the complexities of 21st-century life.

He was asked on Thursday for his response to the incipient market meltdown, provoked by worries that the eurozone debt crisis was about to engulf Spain and Italy. Mr Trichet, 69, who has been the eurozone's "Monsieur Euro" for nearly eight years, said the European Central Bank (ECB) would resume its purchases of Portuguese and Irish debt. Result: an even steeper plunge in the markets. Fears about Portugal and Ireland were old hat after all. Was the ECB going to do nothing at all for Italy and Spain?

To blame Mr Trichet for the subsequent market firestorm in Asia, America and Europe would be unfair. The contagion of pessimism had already taken hold. Mr Trichet's defenders say he was trying to be subtle. By reminding the markets that the ECB could intervene to buy up the debt of struggling eurozone members, he was implying that help would also be available for Spain and Italy. If he had stated boldly that the ECB was going to intervene to buy up Spanish and Italian debt, the markets would, he feared, have taken his words as proof that Rome and Madrid were done for. Probable result: an even more catastrophic plunge in markets.

The episode sums up the disastrous history of the eurozone's efforts to contain its debt crisis over the past 20 months. On one side of the card table, the markets are playing a hardball version of poker. On the other, the governments and the central bank are going through the inevitable, hesitant, complex, shuffling search for EU compromise, a version of bridge, in which 17 partners are trying to read, ignore or adjust to each other's hands.

In recent months, Mr Trichet has urged EU governments to vault ahead of the markets and move towards a more federal system of eurozone "governance" which would make it harder to pick off the euro-stragglers. If the governments had listened, his defenders say – by which they mean "if Berlin had listened" – the debt crisis might have been solved months ago.

This summer, Mr Trichet has fought a long rearguard action – supported by President Nicolas Sarkozy, who detests him – to defeat the German Chancellor Angela Merkel's plan to force banks to share the pain of buying out Greek, Irish and Portuguese debt. Mr Trichet was forced to give way, in part, last month. The complex formula agreed in Brussels for imposing a voluntary "haircut" on the banks was largely of his devising. It appeared to have worked until this week.

Jean-Claude Trichet is not a banker; he originally trained as an engineer. He is a classic product of the French administrative elite, a graduate of the grandes écoles who rose through the ranks of French ministerial offices to become deputy head of the IMF, governor of the Bank of France and then governor of the ECB. In other ways, Mr Trichet does not fit the usual pattern of the French mandarin classes. He came from a left-wing, artistic family. He loves poetry. He was a moderate activist at the time of the May 1968 student and worker revolt.

Although a non-elected super-official, he has the charm that might have made him a successful politician. He has something of the Clinton-Blair-Chirac talent for making people feel at ease, important and interesting. But Mr Trichet also has a capacity to make a fool of himself. When appointed ECB governor in 2003, he said in English: "I am not a Frenchman."

Jean-Claude Trichet was born in Lyon in December 1942. He was educated at the Lycée Condorcet in Paris and at an elite engineering college, the École Nationale Supérieure des Mines at Nancy. At the time of the 1968 student revolt, he was at Sciences-Po, the training ground for the French political and administrative elite in Paris. He went on to the most prestigious of all French administrative finishing schools, the École Nationale d'Administration.

Despite his left-wing background and youth, Mr Trichet worked as an aide for the centre-right President Valéry Giscard d'Estaing in the late 1970s. By the early 1990s he was head of the tax-raising and spending department in the finance ministry. He was also among the French negotiators before the Maastricht treaty in 1991 and therefore a midwife of the euro.

Trichet (and France) argued at that time that the euro could not survive if it was a currency with no political foundations. There must be, at the very least, a harmonised EU fiscal and economic policy. The Germans, fearing that European economic governance would mean French economic government, refused to countenance any such idea. One of the consequences of the present endless crisis has been the collapse of this German veto. But the process of moving towards a quasi-federal management of the eurozone has been too slow and chaotic to tame the markets.

Mr Trichet became a public figure in 1993, when he was appointed governor of the Bank of France, about to be made independent of politicians. He pursued a policy of a strong franc and anti-inflationary monetary orthodoxy which infuriated both right and left.

As governor of the ECB, Mr Trichet was accused of being obsessed with inflation rather than growth. On his watch, however, the notional deficit and debt ceilings in the eurozone were smashed not just by the Greeks but also by the French and Germans.



Mr Trichet, whose career has spanned 40 years of almost unbroken success, will retire at the end of October with "his" euro threatened with shipwreck, if not already broken on the rocks of debt and indecision. His fault? Hardly. His critics insist, all the same, that his gaffe this week sums up his inability to understand the psychology of the markets.

His successor, Mario Draghi, former Italian central bank governor, is in some ways an Italian Trichet: a non-elected super-civil servant. Mr Draghi was, however, vice president of Goldman Sachs in Europe for five years. For once, having "Goldman Sachs" on your CV may be something that even euro-enthusiasts can welcome.

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