The Great Debate UK

Trichet’s United States of Europe?

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By Kathleen Brooks. The opinions expressed are her own.

Another week another round of EU officials proposing solutions to the Greek insolvency problem.

First there was the President of the European Council Jean Claude Juncker who suggested that bond holders could be tempted into rolling over their maturing debt and buying more Greek bonds as long as a few sweeteners like higher coupon or interest rates were thrown in.

But while this will plug short-term financing needs it is still only adding more debt to Greece’s enormous debt pile and not dealing with the core problem:  the financial malaise at the heart of the euro zone that allowed Greece to get away with a flagrant breach of fiscal rules for years.

It came down to Jean-Claude Trichet, whose tenure as President of the European Central Bank (ECB) comes to an end in October, to suggest a long-term solution that would hopefully avoid another debt crisis, but would also require a degree of economic centrality never imagined by the euro zone’s founding fathers.

Bernanke steps up to scrutiny

-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.- U.S. Federal Reserve Chairman Ben Bernanke speaks at the Federal Reserve Bank of Atlanta 2011 Financial Markets Conference in Stone Mountain, Georgia, April 4, 2011. REUTERS/Tami Chappell

While ECB head Jean Claude Trichet is nearing his final post-policy decision press conferences – he retires in October – on the 27 April the Fed’s Ben Bernanke will be stepping up to the podium for his first.

A new paradigm for inflation

-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.-

Looking through the minutes of the Bank of England’s policy meetings for the past year, there are a couple of patterns that you see emerge. Firstly, that rates are on hold, and secondly, that the UK’s elevated inflation rate is temporary. Now the European Central Bank has joined the chorus. ECB President Trichet recently sounded confident that prices will moderate, even though consumer prices rose above the ECB’s target rate of 2 per cent in December.

from Commentaries:

Trichet points to possible double-dip recession in Europe

In his cautious Franglais central-bank speak, Jean-Claude Trichet has pointed to the strong possibility that the euro zone may face a double-dip or W-shaped recession.

Of course, that's not exactly what the European Central Bank president said. But how else are we to interpret his repeated references to a "bumpy road" ahead, and his comment that we are likely to see quarters with positive growth and other quarters with "less flattering" figures? All this was illustrated with a hand gesture that drew a W (or a corrugated iron washboard) rather than a V or a U.

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