Wednesday, October 10 15:46:16
Jean Claude Trichet, former head of the ECB, today defended his handling of the way Ireland was treated when the current bailout was negotiated, saying that Ireland got a better deal than any other State that has received aid.
Speaking at a suite he retains at the Bank of France, Trichet also rebuffed criticism of the ECB's pressuring of Ireland not to inflict losses on the bond holders of its troubled banks back in 2009-2010.
That decision shifted banking debt on to Ireland's sovereign debt and shoved the country out of the bond market.
"I had a lot of conversations with the Irish governments and a lot of conversations with all governments of Europe."
"The ECB had probably done for Ireland in terms of financing the economy more than any other economy in the euro area and perhaps more than any central bank for any economy," he said.
He said that the European Central Bank's new bond purchase programme will be more successful than the bank's first effort because its design means governments will be forced to mend their finances.
The ECB's new Outright Monetary Transactions (OMT) bond buying plan has lifted hopes the euro zone can finally get on top of its problems by buying strained governments enough time to fix their finances.
Trichet said the OMT's improved design will force governments to stick to their debt plans and avoid a repeat of problems the now-discontinued Securities Markets Programme (SMP) suffered when Italy reneged on promises to implement reforms.
"The real difference is that when we took those decisions in the past, we were relying on the promises of the governments," Trichet said in an interview with Reuters Insider television.
"This time the central bank said, and I think it is something that is appropriate taking into account what has been observed in the past, that we will go (and buy bonds) on the condition that there is a call (for assistance) by the country concerned to the governments, to the peers."
Spain is expected to be the first beneficiary of the ECB's new purchases. Trichet said it was not fair to compare Spain's problems with those of Greece, and he urged policymakers not to let up in their crisis fighting efforts. "Spain is not Greece. That is absolutely obvious by all means, any comparison between the two seems inappropriate," he added.