The ECB’s exit strategy gets the austerity treatment

October 7, 2010

Trichet gives the ECB's exit strategy the austerity treatment

Trichet gives the ECB's exit strategy the austerity treatment

As a top central banker you have to watch your words. Almost every one you utter is scrutinised by finanical markets for a cryptic hint on policy the way a jeweller studies a diamond. So when you chop out almost a quarter of the content of your main policy message, the likelihood is that you know you are playing with fire.
The ECB juggled the flames on Thursday, slashing 427 words — almost 25 percent –from its monthly policy statement. The leaner 1,388 word composition represented no change at all in the bank’s view of the world, stressed the bank’s President, Jean-Claude Trichet.
But the some of the stuff binned involved some of juiciest material, particularly all-important plans to remove crisis support. That section got reduced by almost 30 percent to a slender 62 words although the message stayed the same, something along the lines of: we will reel support in gradually and when markets are ready.
With central banks in other major advanced economies now turning back in the direction of stimulus, the ECB’s unwavering, albeit shorter, view of the exit route helped the euro break through the $1.40 barrier.
It just shows that austerity really is all the rage in much of the euro zone.

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