ECB head says Chinese help for eurozone is ‘normal’

The outgoing ECB president, Jean-Claude Trichet, has said that it is “absolutely normal” for the European rescue fund to try to find more money

31 October 2011 Last updated at 01:16

The president of the European Central Bank has denied that eurozone countries are going “cap in hand” to China.

On the eve of his departure from the ECB’s top job, Jean-Claude Trichet said the move was “absolutely normal”.

The head of the European Financial Stability Facility (EFSF) has been meeting Chinese officials in an effort to boost the bailout fund.

Mr Trichet hands over the reins of the ECB to the Italian central banker, Mario Draghi, on Tuesday.

Klaus Regling, chief executive of the EFSF has travelled to Beijing where he is reportedly seeking a pledge of $100bn from China.

China’s President Hu Jintao arrived on Sunday in Vienna for a state visit, before the crucial G20 meeting in the French resort of Cannes on 3 and 4 November.

Mr Hu’s visit to Europe, his second in a year, comes after EU leaders last week appealed to China to invest in the region’s debt rescue fund, to help it overcome a spiralling debt crisis.

But China’s Vice-Finance Minister Zhu Guangyao played down hopes of a breakthrough at the G20 summit, insisting investment in the European bailout fund was not on the agenda.
‘Benign neglect’

As the ECB President says farewell, he admits Greece should have come under greater scrutiny.

Mr Trichet’s tenure at the ECB, will probably be defined by the sovereign debt crisis, although for the first half of his eight years in the job, the eurozone economy grew at a respectable rate, inflation was moderate and the financial system was stable.

In an interview with the BBC’s economics editor, Stephanie Flanders, the outgoing ECB chief has now said that Greece should have come under greater scrutiny before it joined the euro.

“With the hindsight they (the governments of the eurozone) should have applied rigorously the rules that existed in the euro area,” he said.

Last week, the French President, Nicholas Sarkozy, said Greece should not have been allowed to join the single currency in 2001.

Mr Trichet said when Greece was let into the euro club, there was an atmosphere of “benign neglect”.

“The benign neglect, which was the benign neglect of the markets, the benign neglect I have to say also of the governments, individually and collectively, let the thing go.”

The ECB has become a target for protesters as the debt crisis continues.

Some analysts claim the ECB did not respond quick enough to the crisis. Mr Trichet countered such criticism by pointing out that the ECB was the first central bank in the world to provide the financial system with liquidity back in 2007.

Having come to office during a period of relative calm, Mr Trichet hands the baton to Mario Draghi during the eurozone’s biggest-ever crisis.

But Mr Trichet told the BBC that, while there is hard work ahead, the crisis can be solved.

“We know where we go, but we have to take into account the storms, and we are in a stormy period at a global level”, he said.
Super Mario

His successor will spend his last working day in Rome looking anxiously at the performance of Italian government bonds and bank shares as markets reopen after the weekend.

Amid the turbulence on the Italian financial and political scene, the Bank of Italy is regarded as the one institution that has retained its international prestige.

Known as Super Mario, Mr Draghi has restored credibility to the bank since he took over as governor six years ago, after it had been tarnished by a scandal involving his predecessor Antonio Fazio.

Mr Fazio was accused of insider trading and may still face trial.

Mr Draghi has already warned that the European Central Bank, which has been purchasing massive quantities of Italian government debt in recent weeks, cannot continue to do so indefinitely.

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