ECB head blames Germany and France for debt crisis

European Central Bank chief Jean-Claude Trichet has blamed Germany and France for helping to pave the way to the current debt crisis in the eurozone by setting a poor fiscal example.

ECB head blames Germany and France for debt crisis
Pointing fingers - Trichet. Photo: DPA

In remarks published on Sunday in the Welt am Sonntag newspaper, Trichet said that by compromising the European Union’s Stability and Growth Pact in 2004, the powerhouses had allowed budgetary discipline to slacken.

“I wish the German public had reacted with the same indignation to the breach of the Stability Pact in 2004 that they showed toward our decision to buy government bonds,” he said, referring to the ECB’s unprecedented move in May aimed at halting speculative attacks and restoring market stability.

He noted that both Berlin and Paris had failed to uphold the standards they had fought to impose on the EU by forcing through a dilution of Stability Pact’s strict penalties for excessive public deficits.

“The governments were extremely unreliable, over the course of months and years,” Trichet said.

The ECB president ruled out a default by debt-wracked eurozone countries Greece, Spain or Portugal.

“We will not allow that,” he said.

Trichet also had sharp words for banks in the aftermath of the financial crisis touched off by the collapse of US investment bank Lehman Brothers in September 2008, which sent the global financial system into turmoil.

He said still “excessive” salaries and bonus packages based on short-term profits with little foundation in the real economy were unsustainable.

“That has nothing to do with our fundamental democratic values,” he said.

EU leaders agreed on Thursday to impose a tax on banks that could fund future bailouts in the wake of Europe’s debt crisis, and to “promote” the option of a global tax on financial transactions when G20 leaders gather for a summit in Toronto, Canada next weekend.

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