‘Ayatollah of franc’ takes reins at ECB

PRESIDENT elect of the European Central Bank, Jean-Claude Trichet’s singled mindedness on stability once resulted in him being dubbed the “ayatollah of the strong franc.”

Bank of France governor Trichet, who was appointed the second president of the ECB yesterday, will take over the Frankfurt-based ECB when Wim Duisenberg retires on November 1, after EU leaders agreed Mr Trichet’s appointment in Brussels.

Mr Duisenberg is fulfilling a 1998 pledge, that he made under pressure from France, to cut short his eight-year term as the bank’s first leader.

Mr Trichet admits he is obsessed with stability, whether it’s supermarket prices, the euro’s exchange rate, or just the way he speaks.

Mr Trichet, who is zealous in his defence of the creation of the euro, is said to abhor inflation, and is broadly regarded as a hawk, one of those central bankers who keeps interest rates high to ensure price stability, even if economic growth suffers.

Asked in an interview with Italian financial daily, Il Sole 24 Ore, what advice he would give Mr Trichet.

Wim Duisenberg said: “That he would be transparent, attentive, and prudent, and that he follow our monetary policy strategy.”

During his hearing at the EU monetary committee, Mr Trichet said the ECB’s main job is to fight inflation, and said it’s not his job to punish France and Germany for their deficits.

Mr Trichet now faces the challenge of restoring growth to the sluggish euro-zone economy.

Additional reporting Reuters and Bloomberg.