Sir, Your editorial "Merci, Jean Claude" (October 8), praising Jean-Claude Trichet’s eight-year stewardship of the European Central Bank, has to remind one of the lavish praise prematurely heaped on Alan Greenspan as he stepped down from the Federal Reserve’s helm in January 2006.
With the bursting of the US housing market bubble in 2007-08, praise for Mr Greenspan soon turned into almost universal condemnation. It is all too likely that a similar fate awaits Mr Trichet as the euro unravels over the next year or two.
History is judging Mr Greenspan harshly for his having failed to grasp the dangers of the US housing and credit market bubbles. It would seem more than probable that history will castigate Mr Trichet for having failed to grasp the dangers of the very large external imbalances that developed between members of the European monetary union. Mr Trichet’s belief that those imbalances did not matter much in a currency union blinded him to making timely warnings about those dangers or to adopting a more appropriately accommodative monetary policy stance to help the process of addressing those imbalances.
Mr Trichet will also long be remembered for two egregious interest rate policy blunders. The first was the mistake of raising interest rates on the very eve of the 2008-09 Great Economic Recession. The second was again raising interest rates in the first half of 2011 at the very time that the eurozone debt crisis was intensifying and then failing to cut interest rates at his last meeting as president of the ECB.
Desmond Lachman is a resident fellow at AEI.